January 30, 2018 | Jeff Hallman
"Home prices continue to rise three times faster than the rate of inflation," says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

Blitzer blames the continued lack of supply for the price gains, citing a very slow recovery in the home construction market. Home builders are ramping up production but are still not at even historically normal levels, never mind the huge pent-up demand in the market.

"Without more supply, home prices may continue to substantially outpace inflation," added Blitzer

Local metropolitan markets seeing the highest gains are those that were rising fastest before the financial crisis. San Diego, Los Angeles, and Las Vegas continue to see strong gains. Seattle and San Francisco are seeing the highest gains of all, due to strong employment and very tight supply in both those markets.

Home prices in November were still benefiting from very low mortgage interest rates, but that is no longer the case. Mortgage rates are up dramatically since the start of this year, making housing less affordable. That could put downward pressure on home prices during the spring market, especially compounded by new tax laws that limit the deductions for property taxes and mortgage interest.

Prices are unlikely to ease by much, however, given the still very short supply of homes for sale. The simple rules of low supply and high demand will serve as a strong contender against higher rates, as bidding wars will likely be less the exception and more the rule in the upcoming spring market



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