U.S. home prices are climbing again, but at more measured rates than during the last boom. Why the housing cycle still has room to run.

Jonathan Laing:

It’s no secret that U.S. home prices have enjoyed a healthy rebound in 2013 after the nightmarish 33% drop over the previous five years that triggered an orgy of mortgage defaults and wealth destruction. These days, monthly home-price reports regularly show double-digit percentage jumps over the year-earlier period, whether it’s the 13.3% annual increase for September of the S&P/Case-Shiller 20-City Composite Home Price Index or the 12.2% annual rise for October logged by CoreLogic’s home-price index.
 
 Yet, at least some observers question how much longer the home-price recovery can continue. A jump in mortgage rates along with the torrid increases in home prices have hurt transaction volume some. The market has been overly dependent on all-cash buyers such as vulture funds, which earlier this year accounted for about a third of all sales. What will happen when they have eaten their fill? Increasingly, the home-price growth will depend on conventional buyers, who must borrow from a mortgage-lending industry that is still imposing stringent lending standards on new mortgages.
 
 
 William Waitzman for Barron’s
 Still, after talking to various industry experts and analyzing disparate data, Barron’s thinks that home-price appreciation should continue for the next three years, albeit at a slower pace than the double-digit increases seen this year.