"In comparing current home price movement to history, it is necessary to adjust for inflation", he said.
The 10-City Composite posted a 4.9 percent annual increase, up from 4.4 percent in the previous month, while the 20-City Composite recorded a year-over-year gain of 5.6 percent, up from 5.2 percent in November. That's up from 5.6% the month before.
According to David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, 'questions about whether this is a normal housing market or if prices could be heading for a fall are natural'.
"Home prices are rising, but the speed is not alarming", Blitzer wrote. Seattle led the way with a 10.8% year-over-year price increase in December, followed by Portland with 10.0%, and Denver with an 8.9% increase.
While Mr. Blitzer said the rate of appreciation is much higher than the average pace of 1.3% since 1975, it remains within the range economists consider normal. "Only an increase in inventory can soften the price pressure".
Prices in Palm Beach, Broward and Miami-Dade counties increased by 6.8 percent in December from a year ago, according to the S&P CoreLogic Case/Shiller housing index released Tuesday.
The moderation in U.S. bond yields has halted the increase in mortgage rates which should provide some further support to the housing sector and low inventory levels will also support prices in the short term.
US single-family home prices accelerated at a faster pace than expected in December on the back of a low inventory of housing stock, a survey showed on Tuesday.
Blitzer noted that new hope sales were higher than in recent years, at 555,000 in 2016, but still under the average pace of 700,000 since 1990. The average interest rate on all mortgage loans was 4.17 percent, up 26 basis points from 3.91 in December, while the average interest rate on conventional, 30-year, fixed-rate mortgages of $424,100 or less was 4.37 percent, up 29 basis points from 4.08 in December. In the boom-bust of 2005-2009, prices of low, medium, and high-tier homes moved together, while in other periods, including now, the tiers experienced different patterns.
The graph below shows the longer term trend in the Case Shiller Chicago home price index. In fact, single family home prices are still 19.3% below the peak and condo prices are 14.2% below peak.
December's numbers reflect the peak of a sharp rise in mortgage rates following the US election.