WASHINGTON — U.S. home prices climbed higher in June with gains that are eclipsing income growth – creating affordability pressures for would-be buyers.
The Standard &Poor’s CoreLogic Case-Shiller 20-city home price index rose 5.7 percent in June, according to a Tuesday report. The separate national average rose as well, putting it 4.3 points above its housing bubble-era peak in July 2006.
The price increases are different from the bubble period, when subprime mortgages led to a housing bust. There is a shortage of properties for sale, causing the prices to steadily rise at more than double the pace of average hourly earnings. Buyers are also relying on historically low mortgage rates to ease the affordability pressures.
Cheaper borrowing costs have kept buyer demand strong despite the price increases.
Prices are likely to keep rising, said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.
“Given current economic conditions and the tight housing market, an immediate reversal in home price trends appears unlikely,” Blitzer said.
The largest price gain over the past year occurred in the Seattle metro area with a 13.4 percent increase year-over-year.
The National Association of Realtors said last week the number of existing homes listed for sale has plummeted nine percent over the past 12 months to 1.92 million. Because buyers are competing for fewer homes, the Realtor’s median sales price has surged 6.2 percent to $258,300.