U.S. Home Price Growth Gains Momentum in September, Case-Shiller Says

Home price growth accelerated in September, according to a report released Tuesday, underscoring concerns that lofty price gains are helping to keep some buyers out of the market. The S&P/Case-Shiller Home Price Index, covering the entire nation, rose 4.9% in the 12 months ended in September, stronger than a 4.6% increase in August. The 10-city index gained 5% from a year earlier, compared with a 4.7% increase in August. The 20-city index gained 5.5% year-over-year compared with 5.1% a month earlier. Economists surveyed by The Wall Street Journal expected a 5.2% increase in the 20-city index. "Home prices and housing continue to show strength with home prices rising at more than double the rate of inflation," said David Blitzer, managing director at S&P Dow Jones Indices. Economists have cautioned that prices also are growing roughly twice as fast as incomes, potentially keeping younger buyers out of the market. Mr. Blitzer said the median home price remains affordable to a typical family, when factoring in very low mortgage rates, although affordability has worsened recently. After years of volatility, home price growth appears to have stabilized at an annual rate of around 4% to 5%. Economists said prices, sales and new-home construction are likely to continue to grow moderately going into next year as the market continues its return to normal. "We expect solid employment growth and modest wage increases to continue to support the housing market," Rob Martin, an analyst at Barclays Research, said in a note to clients. The hottest markets in the country continued to show double-digit price gains. In San Francisco prices were up 11.2%, in Denver they rose 10.9%, and in Portland they grew 10.1%. Phoenix continued the longest streak of year-over-year price increases, with a 5.3% gain in September marking 10 months of gains. Month-over-month price gains were also fairly strong. Not seasonally adjusted, the U.S. Index rose 0.2% from August to September. The 10-city and 20-city indexes also both rose 0.2% over the month. After seasonal adjustment the national index was up 0.8%. The 10-city and 20-city composite were both up 0.6% over the month. Case-Shiller offers one of the clearest indicators of how home prices are faring, but also provides a delayed picture. More recent indicators show that the pace of home sales slowed considerably in October, which many economists blamed on rising prices. Sales of existing homes fell in October after a September surge, as rising home prices and a lack of inventory challenged potential buyers, according to the National Association of Realtors. The pace of existing-home sales fell 3.4% in October from September to a seasonally adjusted annualized rate of 5.36 million. Markets in the West and the South, which have seen some of the strongest price gains suffered the most, indicating that affordability is a concern. Economists said that particularly if mortgage rates that could make it even more difficult for people to afford homes in those areas and slow sales. "The threat of rising interest rates may soon put a damper on housing affordability, especially in hotter, coastal markets," said Svenja Gudell, chief economist at Zillow Group Inc. Write to Laura Kusisto at laura.kusisto@wsj.com This story originally appeared in The Wall Street Journal.