What Goes Up Must Come Down . . . Eventually?

Home prices continue to rise, albeit more slowly, according to June's S&P Case-Shiller U.S. National Home Price NSA Index, the leading measure of U.S. home prices. The index, which covers all nine U.S. census divisions, reported a 5.8 percent annual gain in June, up from 5.7 percent in May.

The 10-City Composite showed a 4.9 percent annual increase, down from 5.0 percent the previous month, while the 20-City Composite remained the same at 5.7 percent gain year-over-year.

"The trend of increasing home prices is continuing," said Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices David M. Blitzer. "Price increases are supported by a tight housing market. Both the number of homes for sale and the number of days a house is on the market have declined for four to five years."

Blitzer said that the current months-supply of existing homes for sale is at 4.2 months, which is low. Housing starts remain below their pre-financial crisis peak as new home sales have not recovered as fast as existing home sales.

Among the 20 cities, Seattle, Portland, and Dallas had the highest year-over-year gains. Seattle took the No. 1 spot with a 13.4 percent price increase. Portland grew by 8.2 percent, and Dallas rose 7.7 percent.

Before seasonal adjustment, the index reported a June month-over-month gain of 0.9 percent. Both 10- and 20-City Composites were up 0.7 percent. Seasonally adjusted, the index recorded gains of 0.4 percent month-over-month, while 10-City Composite showed no change and 20-City Composite posted an increase of 0.1 percent.

Blitzer said rising home prices are the primary factor in lack of affordability, but influences such as declining national unemployment rates and robust growth of job creation are more favorable.

"Wages and salaries are increasing, maintaining a growth rate a bit ahead of inflation. Mortgage rates, up slightly since the end of 2016, are under 4 percent," Blitzer said. "Given current economic conditions and the tight housing market, an immediate reversal in home price trends appears unlikely."