Home-price growth continued accelerating in February, a sign that the market is still heating up five years after it hit bottom in the same month in 2012.
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The S&P CoreLogic Case-Shiller Indices, which cover the entire nation, rose 5.8% in the 12 months ended in February, up from the 5.6% year-over-year increase reported in January. That was the strongest rate of growth in 32 months.
The 10-city index gained 5.2% over the year, compared with 5% the prior month, and the 20-city index rose 5.9% year-over-year, compared with a 5.7% increase in January.
That slightly beat the expectations of economists surveyed by The Wall Street Journal, who expected the 20-city index to rise 5.8% in February.
The gains are being driven by growing demand thanks to rising wages and a large demographic of people entering their 30s and looking to buy homes, as well as limited supply. Economists said they are concerned, however, that price growth that continues to outpace income growth isn't sustainable.
The strong growth in prices also poses a challenge for first-time buyers trying to get into the market this year.
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Home prices hit a record in September and the pace of growth has accelerated since then.
"Housing affordability has declined since 2012 as the pressure of higher prices has been a larger factor than stable to lower mortgage rates," said David Blitzer, managing director at S&P Dow Jones Indices.
Still, home-price growth remains less than half of what it was during the housing bubble in the mid-2000s. Then prices grew by more than 14% for much of 2005.
"Is it going to be a horrendous collapse? No I don't think it will be. Will there be people in the next five years who are forced to sell their house for less than they paid? Yeah, there will be some people," Mr. Blitzer said in a recent interview.
Economists are watching especially closely about a few markets that have been seeing double digit or near-double digit growth. Seattle led the way in February with a 12.2% annual home-price increase, while Portland reported a 9.7% year-over-year gain. Dallas replaced Denver in the top three, with a 8.8% annual increase in home prices.
Month-over-month, the U.S. Index rose 0.2% in February before seasonal adjustment, while the 10-city index rose 0.3% and the 20-city index increased 0.4% from January to February.
After seasonal adjustment, the national index rose 0.4% month-over-month, the 10-city index rose 0.6% and the 20-city index rose 0.7%. After seasonal adjustment, 19 out of 20 cities saw prices rise.
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Corrections & Amplifications
This item was corrected at 9:59 a.m. ET to show that home prices grew by more than 14% for much of 2005, not 2015.
Home prices grew by more than 14% for much of 2005. "U.S. Home-Price Growth Continued Accelerating in February," at 9:15 a.m. ET, incorrectly stated that prices rose 14% for much of 2015 in the 9th paragraph. (April 25, 2017)
(END) Dow Jones Newswires
April 25, 2017 10:13 ET (14:13 GMT)