NEW YORK – May 31, 2017 – These are heady days for American home sellers, with a report Tuesday showing that housing prices in March recorded their largest annual increase in nearly three years.

But the gains are inflicting more financial pain on home buyers, though the price run-up has fallen well short of the annual double-digit increases during the mid-2000s housing bubble.

Home prices across the USA were up 5.8 percent annually in March, up from 5.7 percent the prior month, according to the S&P CoreLogic Case-Shiller national index. Driving the increase were a longstanding shortage of both new and existing homes combined with steady job and income growth that's prompting more Americans to buy houses for the first time or trade up.

The pace of price gains has accelerated in 2017 after year-over-year increases held fairly steady at a healthy 5 percent or so from 2014 to 2016.

"Home buyer demand is sky high, inventory levels are near rock bottom and home prices keep rising," says Svenda Gudell, chief economist of real estate research firm Zillow.

S&P Case-Shiller's 10- and 20-city indices, which track the largest metro areas, increased 5.2 percent and 5.9 percent from a year ago, respectively, unchanged from February.

On a monthly basis, the national index rose 0.3 percent seasonally adjusted while the 10- and 20-city indices each increased 0.9 percent. Seventeen of the 20 cities reported monthly increases after seasonal adjustment.

Seattle again led the nation with a 12.3 percent year-over-year gain in home prices, followed by Portland at 9.2 percent and Dallas at 8.6 percent. Half the areas in the 20-city index rose by more than 6 percent. New York posted the smallest gain at 4.1 percent, which was still double the rate of inflation.

Nationally, there's a 4.2-month inventory of existing homes for sale, down from 4.6 months a year ago and a normal level of about six months, according to the National Association of Realtors.

"People are staying in their homes longer rather than selling and trading up," says David Blitzer, managing director of S&P Dow Jones' index committee.

"If mortgage rates, currently near 4 percent, rise further, this could further deter more people from selling and keep pressure on inventories and prices."

He adds "there's no way to tell" when rising prices and mortgage rates will cool off the market.

Gudell says price increases should moderate as builders add more supply.

The national index is now 1.3 percent above its 2006 peak while the 10-city and 20-city indices are still 7.6 percent and 5.4 percent below their 2006 highs, respectively.

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