Another month, another gain in home price index

A closely watched index of the housing market shows home prices rising across the country.

The S&P/Case-Shiller U.S. National Home Price Index showed a year-over-year 5.5% gain in April, slowing down slightly from its 5.8% growth in March.

Seattle, Portland, Oregon, and Dallas were the big gainers in April, on the 20-city home price index, which gained 5.7% year over year. Cleveland reported the smallest gain, at 3.4%, on the 20-city composite.

Topping the list with an April index level of 259.33 is Los Angeles.

David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, raised the question: could this be a bubble?

“Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up,” he said. “The increase in real, or inflation-adjusted, home prices in the last three years shows that demand is rising. At the same time, the supply of homes for sale has barely kept pace with demand and the inventory of new or existing homes for sale shrunk down to only a four-month supply. Adding to price pressures, mortgage rates remain close to 4% and affordability is not a significant issue.

“The question is not if home prices can climb without any limit; they can’t. Rather, will home price gains gently slow or will they crash and take the economy down with them? For the moment, conditions appear favorable for avoiding a crash.”