Home sales prices rose 5.3% in November, according to data released Tuesday, continuing a growth streak that economists warn is hurting affordability, especially in hot coastal markets.

Home sales prices increased 5.3% (seasonally adjusted) year-over-year in November, according to the S&P/Case-Shiller U.S. National Home Price Index, which tracks all nine Census divisions. That pace was slightly faster than the 5.1% annual gain in October. America’s largest metro areas welcomed faster sales price growth than the nation as a whole, with the index tracking 20 major metro areas gaining an annual 5.8% in November and the 10-city index up an annual 5.3%.

“Home prices extended their gains, supported by continued low mortgage rates, tight supplies and an improving labor market,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “Sales of existing homes were up 6.5% in 2015 vs. 2014, and the number of homes on the market averaged about a 4.8 months’ supply during the year; both numbers suggest a seller’s market.”

Price appreciation, once in the double-digits during housing’s most intense recovery phase, has now stabilized around the 4-5% mark.

Case Shiller NovemberThis chart depicts the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 5.3% annual gain in November 2015. The 10-City and 20-City Composites reported year-over-year increases of 5.3% and 5.8%.

Given the continued housing shortage, it’s at first blush surprising that home sales prices are not rising even more rapidly on a national basis. That’s especially true since at the end of December, the supply of available existing-homes (previously owned) stood at a 3.9-month supply, the lowest level since January 2005. Economists generally consider a six-month supply a healthy market. On the new-home side, builders have simply not been building enough homes to keep pace with demand.

That said, first-time home-buyers are having trouble breaking into the market amid affordability concerns. In November, Portland, San Francisco, and Denver reported the highest year-over-year price gains among the 20 metro areas, at 11.1%, 11%, and 10.9% respectively. Fourteen of the 20 cities posted greater year-over-year price gains in November than in October. Seattle was next with an annual gain of 9.7%, followed by Dallas (9.4%), Miami (8.1%), Detroit (6.3%), and Los Angeles (6.2%).

High student debt loads and rents coupled with stagnant wages are also considered a drag on would-be first-time home-buyers. Real estate data tracking firm Zillow predicts affordability will worsen in 2016, especially for lower- and middle-income earners. As this trend continues, economists predict that lower-priced markets will attract more buyers.

Source: Forbes, January 2016

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