Continuing the trend of the past few years, Western cities led the way in home price gains. Seattle, Portland, and Denver reported the highest increases among the 20 cities over each of the past 12 months, with Seattle posting a January Y-O-Y increase of 11.3%, followed by Portland with 9.7% and Denver with 9.2%. Twelve of the 20 cities reported greater price increases in the year ending January 2017 versus the year ending that ended this past Dec. 31.

NEW YORK CITY—Prices on single-family homes rose faster than expected in January, with S&P Dow Jones Indices on Tuesday posting a 5.7% year-over-year increase in the 20-city S&P CoreLogic Case-Shiller Index and a 5.9% increase in the US National Home Price NSA Index, covering all nine US census divisions. The latter index grew at the fastest pace since July 2014, while the 20-city composite beat estimates of 5.6% from economists polled by Bloomberg and Reuters. The seasonally adjusted month-over-month increase of 0.9% also beat estimates.

“While prices vary month-to-month and across the country, the national price trend has been positive since the first quarter of 2012,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. He notes that last month, the inventory of homes in the market represented 3.7 months of sales, lower than the long-term average of six months.

“Tight supplies and rising prices may be deterring some people from trading up to a larger house, further aggravating supplies because fewer people are selling their homes,” Blitzer says. “The prices also hurt affordability as higher prices and mortgage rates shrink the number of households that can afford to buy at current price levels. At some point, this process will force prices to level off and decline; however, we don't appear to be there yet.”

He points out that the Federal Reserve's decision earlier this month to raise the federal funds rate by a quarter percentage point is expected to add less than a quarter percentage point to mortgage rates in the near term. “Given the market's current strength and the economy, the small increase in interest rates isn't expected to dampen home buying,” although three or four additional increases this year could be cause for concern.

Continuing the trend of the past few years, Western cities led the way in home price gains. Seattle, Portland, and Denver reported the highest increases among the 20 cities over each of the past 12 months, with Seattle posting a January Y-O-Y increase of 11.3%, followed by Portland with 9.7% and Denver with 9.2%. Twelve of the 20 cities reported greater price increases in the year ending January 2017 versus the year ending that ended this past Dec. 31.