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Are These “Unstoppable” Home Prices Going to Last?

In the latest S&P CoreLogic/Case-Shiller Indices, home prices are reporting growth of up to 6.1% year-over-year in August, up from 5.9% in July. With the economy growing at a lesser pace, this was unforeseen.

S&P Dow Jones Indices Chairman of the Index Committee and Managing Director David M. Blitzer is quoted saying “Home price increases appear to be unstoppable. Most prices across the rest of the economy are barely moving compared to housing. Over the last year the consumer price index rose 2.2 percent, driven largely by energy costs. Aside from oil, the only other major item with price gains close to housing was hospital services, which were up 4.6 percent. Wages climbed 3.6 percent in the year to August.”

Since the economic downturn of 2008, home prices have bounced back, but the new question is whether or not they’ll continue to outpace the rest of the economy. But Blitzer doesn’t think this is price increase is simply a rebound. Instead, housing prices are at an all-time high.

However, the pool of buyers is starting to shrink as it becomes harder and harder to afford new homes, so the Federal Reserve is pushing short-term interest rates which will hopefully reduce home prices.