In much of the Western world people aspire to own their own home. This desire fuels housing construction, financing (via mortgages), estate agencies, renovation and decoration activities, amongst other things. It also means that property prices tend to appreciate over time, usually at a faster rate than earnings which can price people out of the housing market and make marginal borrowers susceptible to financial difficulties when interest rates rise. It will not be forgotten that lending to those who could ill-afford to buy homes, sub-prime borrowers, was at the heart of the Global Financial Crisis.

The S&P Case-Shiller index tracks the price of homes in 20 US cities to provide a snapshot of the market across the nation. In January, prices increased by 5.7% year-on-year from their 2015 values; the increase was marginally higher than the 5.6% increase seen for the comparable period in December.

The available housing stock available for sale declined by 1.1% in February over the same period a year earlier; when demand outstrips supply, the price usually rises more strongly.

As the index is national, rates of increase are not uniform and the cities of Portland, Seattle, and San Francisco saw the sharpest rises. For instance, the price of homes in Portland spiked by 11.8% over the reporting period.

Concerns about affordability have been raised again since the increase in average home prices has outstripped gains in hourly paid workers’ salaries by 2.6 times at a time when mortgage interest rates are near historical lows.

David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices commented on the data: “While low inventories and short supply are boosting prices, financing continues to be a concern for some potential purchasers, particularly young adults and first time home buyers. While rising home prices are certainly a factor deterring home purchases, individual financial positions are more important than local housing market conditions.”