(Bloomberg) -- Home prices in 20 U.S. cities rose at a faster pace than projected in the year through March, reflecting a limited number of available properties on the market.

The S&P/Case-Shiller index of property values increased 5 percent from March 2014 for a second month, the group said Tuesday in New York. The median estimate of 25 economists surveyed by Bloomberg called for a 4.6 percent year-over-year advance. Nationally, prices rose 4.1 percent from March 2014.

Higher home prices along with lean inventory and limited income growth have tempered the recovery in residential real estate. More construction, particularly of cheaper properties, would help boost supply and bring purchases within reach of more Americans looking to take advantage of low borrowing costs.

“We’ve got an increase in demand at the same time supply has been pretty modest -- that’s pushing prices up,” David Berson, chief economist at Nationwide Insurance in Columbus, Ohio, said before the report. “I think house-price gains will moderate, because we’ll start to see more people put houses on the market and more builders building more.”

Economists’ estimates in the Bloomberg survey ranged from gains of 4.3 percent to 5.4 percent. The S&P/Case-Shiller index is based on a three-month average, which means the March figure also was influenced by transactions in February and January.

Home prices in the 20-city index adjusted for seasonal variations increased 1 percent in March from the prior month, in line with the Bloomberg survey median of 0.9 percent.

San Francisco, Denver

All 20 cities in the index showed a year-over-year gain, led by a 10.3 percent increase in San Francisco and a 10 percent pickup in Denver. Prices climbed at the slowest pace, 1 percent, in both Washington and Cleveland.

The price increases accelerated in 10 cities in March from the same time in 2014. The pace of gains slowed in the rest.

The year-over-year gauge, based on records dating back to 2001, provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

“Home prices are currently rising more quickly than either per capita personal income or wages, narrowing the pool of future homebuyers,” David Blitzer, chairman of the S&P index committee, said in a statement. “All of this suggests that some future moderation in home price gains is likely.”

Measured against a month earlier, property prices rose in all 20 cities in March, according to the seasonally adjusted data. They jumped 2.6 percent in Detroit, while Cleveland showed the smallest gain at 0.1 percent.

Housing Supply

A scant supply of homes for sale has helped keep property values rising as buyers bid up prices. Last month, it took about 39 days to sell a house once it came on the market, according to data from the National Association of Realtors. That’s the shortest span since the middle of 2013, said Lawrence Yun, the group’s chief economist.

“We don’t want prices to get too far ahead of income, but that is what’s happening because of lack of supply,” Yun said during a news conference as March sales data were released last week.

Contract closings on previously owned properties unexpectedly dropped 3.3 percent to a 5.04 million annualized rate in April after a 5.21 million pace that was the strongest in almost two years, the NAR figures showed.

While housing has shown uneven growth so far in 2015, the data home-improvement retailer Lowe’s Cos. Inc. remains upbeat.

‘Steady Recovery’

“We continue to see steady recovery within the housing market,” Chief Executive Officer Robert Niblock said on a May 20 earnings call. “Key drivers of home-improvement industry growth -- job and income growth, home buying and home price appreciation -- remained aligned.”

A stronger pickup in wages would make a home-buying decision easier for more Americans.

While the employment cost index advanced in the first quarter at its fastest pace since the end of 2008, other measures show more modest gains. Average hourly earnings increased 2.2 percent in April from a year earlier, compared with a 2 percent average during the expansion that began in June 2009.

Borrowing costs have remained attractive for those able to get financing. The average rate on a 30-year, fixed mortgage was 3.84 percent in the week ended May 21, close to the level at the start of 2015 and below last year’s high of 4.53 percent in January 2014, according to data from Freddie Mac in McLean, Virginia.

Special Reports /

Home prices in 20 U.S. cities increased 5% in year to March

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