WASHINGTON (AP) - Steady job growth, low mortgage rates and tight inventories helped fuel rising U.S. home prices in October.
WASHINGTON (AP) — Steady job growth, low mortgage rates and tight inventories helped fuel rising U.S. home prices in October.
The Standard & Poor's/Case-Shiller 20-city home price index rose 5.5 percent in the 12 months ending in October, up from a 5.4 percent pace in September, according to a report released Thursday.
Home values have climbed at a roughly 5 percent pace during much of 2015, as strong hiring has bolstered a real estate market still recovering from a housing bust that began about eight years ago. Home sales have increased this year as the 5 percent unemployment rate has strengthened confidence in the economy.
Rising demand, however, hasn't been met with an increase in sales listings, causing prices to rise much faster than inflation or wages this year. But many buyers are also benefiting from 30-year, fixed-rate mortgages averaging less than 4 percent, making it cheaper to borrow for a home. Mortgage rates have historically been closer to 6 percent.
Borrowing costs are expected to rise shortly after the Federal Reserve this month raised a key short-term interest rate for the first time in nearly a decade. Yet the federal funds rate — what banks charge each other to lend overnight — remains low at 0.25 percent to 0.5 percent, such that mortgage rates are unlikely to return to their historic averages.
When the Fed previously hiked this rate from 1 percent to 5.25 percent through the middle of 2007, mortgage rates increased a mere 0.75 points.
"These data suggest that potential homebuyers need not fear runaway mortgage interest rates," said David Blitzer, chairman of the index committee at S&P Dow Jones.
But the gains have been uneven. San Francisco, Denver and Portland, Oregon reported increases of 10.9 percent over the past year. Prices in Chicago and the District of Columbia rose less than 2 percent.