U.S. home prices climbed at more than double the rate of incomes in January, a trend that could ultimately create affordability challenges for buyers.
The Standard & Poor's/Case-Shiller 20-city home price index rose 5.7% from a year earlier, a slight increase from the 5.6% annual increase in December, according to a report released Tuesday.
In Los Angeles and Orange counties, home prices jumped 6.9% from a year earlier.
"The pace of U.S. home value growth has been picking up bit by bit over the past few months, driven in large part by stubbornly low inventory in most markets that creates competition and drives up prices for those homes that are available," said Svenja Gudell, chief economist at the real estate firm Zillow.
Home values have risen 2.6 times as fast as average hourly wages, which have improved just 2.2%, according to a government report released this month. Tight supplies of homes on the market have fueled much of the price growth, as low mortgage rates and steady hiring have sparked demand.
San Francisco, Denver, Portland and Seattle each registered double-digit annual price increases. Home values rose in all 20 metro areas' markets, which account for about half of the U.S. housing stock.
The index remains more than 11% below its mid-2006 peak, when subprime mortgages pushed the market to heights that triggered the Great Recession in late 2007.
Existing homes sold at a seasonally adjusted annual rate of 5.08 million in February, the National Assn. of Realtors said this month. Sales slipped 7.1% from a relatively healthy pace in January, but an increase in the number of signed contracts to buy houses indicates that purchases should rebound in March.
Despite the demand, listings in February declined 1.1% from a year earlier. Many homeowners are reluctant to sell because they lack the equity to cover the down payment for upgrading to a new house.
"The low inventory of homes for sale -- currently about a five-month supply -- means that would-be sellers seeking to trade up are having a hard time finding a new, larger home," said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.