Home prices in the U.S. edged up to start the year, in part due to strong growth in markets such as Denver, Dallas and Miami.
Overall U.S. prices were up 4.5% in the year ended in January, according to the the S&P/Case-Shiller Home Price Indices report released Tuesday.
That’s a slowdown from the double-digit pace recorded in early 2014, but still well ahead of tepid inflation. Steady price gains are a sign of a healthy housing market and come when other recent reports show a pick up in sales for both new houses and existing properties.
“The combination of low interest rates and strong consumer confidence based on solid job growth, cheap oil and low inflation continue to support further increases in home prices” said S&P’s David Blitzer.
An improving housing market would be a welcome sign for U.S. economic growth, which appears to have slowed early this year.
Still, there are risks. Home prices are rising at more than double the pace of wages, which have only inched ahead despite steady hiring. And the Federal Reserve appears poised to lift benchmark interest rates later this year, a move that could translate into higher rates on mortgage loans.
Home prices growing faster than wages puts “pressure on potential homebuyers and heightening the risk that any uptick in interest rates could be a major setback,” Mr. Blitzer said.
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