U.S. home prices rose at a healthy clip in April, though the increase slowed a bit from the previous two months.
The Standard & Poor’s CoreLogic Case-Shiller 20-city home price index climbed 5.7 percent in April, after increases of 5.9 percent in March and February. Those gains were the highest in nearly three years.
Home prices are rising roughly twice as fast as average wages, a dynamic that may eventually stifle sales by thwarting would-be homeowners. Bidding wars among buyers competing for a limited supply of available homes are driving up costs. Low mortgage rates are also encouraging more Americans to buy homes.
Seattle, Portland and Dallas reported the largest year-over-year gains in April. Home prices jumped 12.9 percent in Seattle, 9.3 percent in Portland and 8.4 percent in Dallas.
“Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up,” David Blitzer, chairman of the index committee at S&P Dow Jones indices, said.
The number of homes available for sale nationwide has fallen 8.4 percent in the past year to just 1.96 million, according to the National Association of Realtors. That’s enough to last just four months at the current sales pace. A healthy market typically has a six months’ supply.
Many homeowners may be reluctant to sell because prices have been rising so rapidly. Some may also have a very low mortgage rate that they would have to replace with a higher rate if they bought a new home. And many single-family homes were converted to rentals after the housing bust and are likely to remain off the for-sale market.
Developers are breaking more ground on new homes, but they haven’t been doing so quickly enough to keep up with sales. The number of housing starts actually fell 5.5 percent in May from the previous month.
Meanwhile, Americans are snapping up new homes, pushing the median price in May to a record $345,800, nearly 17 percent higher than a year earlier.