U.S. house prices rose 8.5% in the year through August, extending gains even as higher mortgage rates cut into demand for real estate.
Prices climbed 0.3% on a seasonally adjusted basis from July, the Federal Housing Finance Agency said today in a report from Washington. The average economist estimate was for a 0.8% gain, according to data compiled by Bloomberg.
Competition for a limited supply of available homes has been fueling price increases across the U.S. The pace of gains may start to ease as a jump in borrowing costs from near-record lows puts real estate out of reach for some would-be buyers. The average rate for a 30-year fixed mortgage was 4.28 last week, up from 3.35% in early May, according to Freddie Mac.
“Because markets are tight, we are still going to see solid price increases through next year,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, said in a telephone interview yesterday. “Eventually, the growth rate in prices is going to slow down.”
Home affordability was at an almost five-year low in September, with the median price up 11.7% from a year earlier, the National Association of Realtors said this week. Sales of existing houses houses dropped 1.9% to a 5.29 million annual rate, down from a revised 5.39 million pace in August that was the strongest since 2009, the group said.
The FHFA’s report showed prices increased 18.2% from a year earlier in the Pacific area, which includes California and Washington. In the Mountain region, including Nevada and Arizona, the gain was 13.8%. The Middle Atlantic area -- New York, New Jersey and Pennsylvania -- had the smallest increase, at 4%.
The FHFA index measures transactions for single-family properties financed with mortgages owned or securitized by Fannie Mae and Freddie Mac. It doesn’t provide a specific price for homes.