The prices of homes across the US continued to grow into the start of 2018, preserving the ongoing trend of price gains in the American housing market.

The S&P CoreLogic Case-Shiller national index, which measures the price of a typical single-family home in major metropolitan areas across the country, rose a seasonally adjusted 0.5% in the three-month period ending in January and was up 6.2% compared to a year before.

The 20-city index, a composite of 20 major US metropolitan areas, rose a seasonally adjusted 0.8% for the month, and 6.4% for the year.

Economists said the price gains are a direct consequence of the lack of supply of homes in the market.

“We are seeing a close to record low listing of resale properties so we probably should not be surprised at how tight the housing market is,” said Sal Guatieri, Senior Economist, BMO Capital Markets. “People are holding on to their houses and not selling, so its difficult to buy a house people don’t want to sell.”

A decade after the housing market collapse, economists say it has rebounded as home prices have continually risen on a national level.

Furthermore, the supply of homes has declined for 32 straight months on a year-on-year basis, indicating a chronic shortage of houses. Thus, home prices are outpacing the rate of economic growth and the rate of wage growth. Although this may indicate a booming housing market, the reality is that it’s becoming less affordable for people looking to buy their first home.

“Affordability is deteriorating and despite strong job growth, more people will be priced out of the market,” Guatieri added.

The west coast leads the nation as the fastest growing home prices. Seattle, Las Vegas, and San Francisco reported the highest year-over-year gains among the 20 city composite. In January, Seattle led the way, followed by Las Vegas and San Francisco.

In Seattle the trends are aggravated by a population boom fueled by rapid job growth in technology and other industries. Seattle was one of only five big metro areas to gain population last year. Other high-cost cities like New York and San Francisco saw a lot more people move out than move in.

“The stronger than average numbers we are seeing out of Los Angeles, Las Vegas, Seattle, San Francisco, confirms that the shift to the south and west in US population continues,” said Robert Dye, Chief Economist, Comerica Bank.  

Price gains are accelerating. Twelve of the 20 cities reported greater price increases in the year ending January 2018 versus the year ending December 2017.

For the most part, rising home prices are good for local economies because they raise household wealth, add to consumer confidence, and can even spur consumer spending.

For some first-time homeowners, particularly millennials, the achievement of finding a likable home within a certain budget in a tight market is that much more satisfying.

Taylor Cavallo and her husband recently closed on a three-bedroom condo in Minneapolis, Minnesota after a lengthy search for an apartment that fit their needs and budget.

“I am very excited to be a homeowner especially after seeing some places I didn’t think were worth the money they were listed for,” Cavallo said. “It makes the feeling of owning like being much more of an investment since you know how prices are increasing”.

Yet economists are wary that If the sustained housing prices grow disproportionately to income growth, affordability may be in jeopardy.

“The expectations for the US economy are relatively strong given the tax reform and the expected fiscal stimulus, but the real question will be as we get into 2019, and 2020, we will see the odds of a recession move up,” Dye said.