Home Prices Record 5.5 Percent YoY Rise

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USA home prices were rising at an annual pace of 6.8 percent in April, according to the Federal Housing Finance Agency (FHFA), which tracks price changes in homes purchased with Freddie Mac and Fannie Mae loans.

The S&P CoreLogic Case-Shiller composite index of 20 metropolitan areas rose 5.7 percent in April on a year-over-year basis, after an unrevised 5.9 percent increase in March.

Seattle's home prices are growing 2.3 percent faster than the national average, according to the index. Home prices could hit a ceiling, according to S&P Dow Jones Indices Committee Chairman and Managing Director David M. Blitzer, but not give way to collapse.

The indices were created by taking the price of housing in the nation's biggest cities in January 2000, assigning them a value of 100, and tracking their subsequent rise and fall. Blitzer said. "Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up".

The 20-City composite index was up 5.7% year-on-year, down from 5.9% the month before ad below economists' expectations of 5.9%.

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The 10-City and 20-City composites reported 0.8 and 0.9 percent seasonally adjusted month-over-month increases, and only Cleveland, Ohio reported a negative monthly price change. The median price of a Twin Cities metro area home in May was $250,000, according to MAAR, 5.5 percent higher than it was a year earlier. "Adding to price pressures, mortgage rates remain close to 4 percent and affordability is not a significant issue". Any increase in mortgage interest rates would dampen demand. Moreover, mortgage default rates are low and household debt levels are manageable.

The average rate on a 30-year fixed-rate mortgage, the most popular US home loan, was 4.13 percent in the latest week, down from 4.47 percent three months earlier, according to the Mortgage Bankers Association.

High demand and low inventory are responsible for home price hikes across the country, Case-Shiller says.

Housing market observers have long speculated a looming increase in mortgage rates could slow demand, in turn putting the brakes on home prices. Seattle recorded the greatest gains with a 12.9 percent year-over-year price increase, followed by Portland with 9.3 percent and Dallas with an 8.4 percent increase.