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S&P: Home prices move higher in January

Home prices in the U.S. continued to rise in the year endingJanuary 2016, according to data released by S&P Dow Jones Indices.

The S&P/Case-Shiller U.S. national home price index, coveringall nine U.S. census divisions, posted a 5.4% year-over-year gain in January, whilethe 10-city composite was up 5.1% for the year and the 20-city composite notcheda 5.7% annual increase.

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Portland, Seattle and San Francisco recorded the highest year-over-yeargains among the 20 cities covered. Eleven cities reported greater price increasesin the year ended January 2016 than in the year ended December 2015. The westernpart of the country saw the largest price gains in the past year, while the northeastwas the weakest region.

With an annual gain of 6.1% in January 2016, compared to 6.3%in December 2015, Phoenix ended a run of 12 consecutive months of increasing annualgains.

"Home prices continue to climb at more than twice the rateof inflation," David Blitzer, managing director and chairman of the index committeeat S&P Dow Jones Indices, said in a news release. "The low inventory ofhomes for sale — currently about a five month supply — means that would-be sellersseeking to trade-up are having a hard time finding a new, larger home. The recoveryof the sale and construction of new homes has lagged the gains seen in existinghome sales. This may be starting to change: starts of single family homes in Februarywere the highest since November 2007. The single-family-home share of total housingstarts was 70% in February, up from a low of 57% in June 2015, and approaching the75%-80% range seen before the housing crisis."

Month over month, before seasonal adjustment, the national, 10-cityand 20-city indexes all remained unchanged in January. After seasonal adjustment,the national, 10-city and 20-city indexes rose 0.5%, 0.8% and 0.7%, respectively,from December 2015.

Eleven of 20 cities reported increases in January, before seasonaladjustment; after seasonal adjustment, all 20 cities increased for the month.

"While low inventories and short supply are boosting prices,financing continues to be a concern for some potential purchasers, particularlyyoung adults and first time home buyers," Blitzer said. "The issue isavailability of credit for people with substantial student or credit card debt.While rising home prices are certainly a factor deterring home purchases, individualfinancial positions are more important than local housing market conditions. Onehopeful sign is that the home ownership rate, at 63.7% in the 2015 fourth quarter,may be turning around. It is up slightly from 63.5% in the 2015 second quarter butfar below the 2004 high of 69.1%."