U.S. home price rose sharply in October, according to data showed Tuesday. But analysts warned that the prices growth may slow due to higher borrowing costs. The Standard & Poor’s CoreLogic Case-Shiller Indices, which measure home-price on the entire nation, rose 5.6 percent in October from a year earlier. While the 20-city index increased 5.1 percent in October after it gained 5 percent in September.
The higher home prices were boosted by low mortgage rates and limited home supply. The number in October didn’t reflect the Fed’s decision to increase borrowing costs. Higher borrowing costs may result in higher mortgage rates, which tend to reduce buyer demand. Mortgage rates also rose sharply in November after the U.S. presidential election. This may also put pressure on the home price.
“Mortgage interest rates rose in November and are expected to rise further as home prices continue to outpace gains in wages and personal income,” said David Blitzer, managing director at S&P Dow Jones Indices. “Home prices cannot rise faster than incomes and inflation indefinitely.”
“Affordability measures based on median incomes, home prices and mortgage rates show declines of 20-30 percent since home prices bottomed in 2012. With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends,” he said.