US home prices hit new high, up 5.6% in October: S&P CoreLogic Case-Shiller

Prospective buyers look at a home in Ansonia, Conn.
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U.S. home prices hit a new peak in October, according to monthly figures, though the data-provider warned that the pace of growth cannot continue forever.

The S&P/Case-Shiller U.S. National Home Price Index, which measures all nine U.S. census divisions, was also up 5.6 percent in October from the previous year, extending a new high from the previous month.

The S&P CoreLogic Case-Shiller 20-City Composite Home Price Index rose by 5.1 percent in October from the same time last year.

"Home prices and the economy are both enjoying robust numbers," David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.

"However, mortgage interest rates rose in November and are expected to rise further as home prices continue to out-pace gains in wages and personal income."

Blitzer noted that measures of home affordability—which are based on median incomes, housing prices and mortgage rates—have fallen by 20 percent to 30 percent since home prices hit a bottom in 2012. While consumer confidence is high and unemployment is low, home prices cannot keep rising faster than incomes and inflation, he said.

Home prices in many markets have reached levels not seen since the days of the housing bubble, according to Dr. Svenja Gudell, chief economist at Zillow. But she said that is where the comparison ends.

"A decade ago, growth in the housing market was driven primarily by loose and predatory lending, speculation and over-building — forces that only served to artificially inflate and overheat the market," she said.

"The growth we're seeing today is, instead, a natural reaction to basic economic fundamentals. More and better opportunities for American consumers means high demand for housing, and that demand is not being met by an adequate supply of homes for sale — and so prices rise."