As Asking Prices Rise Again, Have House Hunters Missed the Window of Opportunity?

Rising prices are good for the economy, but they could also mean record affordability is in the past.

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After several years of miserable housing market conditions, it seems sellers are getting a little more comfortable with nudging up their asking prices. While that's good news for sellers and underwater homeowners, house hunters looking for bargain basement deals could be running out of time.

Asking prices—the earliest indicator of the direction of property values—rose 2.3 percent in August year-over-year, according to real estate site Trulia, with gains recorded in more than two-thirds of the nation's largest metro areas.

That's the largest annual jump reported by the Trulia Price Monitor index, and the largest year-over-year increase since the beginning of the recession. Cutting out foreclosures, which tend to sell at deep discounts and drag down home values overall, means the gains were even higher, with asking prices nationally rising almost 4 percent.

[Read: Housing Market Continues to Heal as Home Prices Rise Again.]

Part of the uptick in prices has to do with inventory constraints due to fewer foreclosures on the market and ultimately fewer distressed sales. With less competition from cheaper foreclosures sellers can start thinking about raising their asking prices.

"The decline in distressed sales is part of the explanation of why prices are rising," says Jed Kolko, chief economist at Trulia. "But it's also part of the return to normal. As the market recovers, distressed sales should be a smaller part of the market."

"The price increases we're seeing are real," Kolko adds.

[Read: Housing's Achilles Heel: Under 40 and Underwater.]

To be sure, increasing home prices are important to sustain the housing recovery, not least because they help millions of underwater homeowners start to dig out from under the avalanche of debt triggered by the housing bust. Rising prices also encourage builders to break ground on more new homes, which could help reboot the construction industry and create more jobs.

But rising prices are a catch-22, Kolko says. Along with record low mortgage rates, low home prices made owning on a home more affordable than ever. Now, with property values gaining on wage increases—wages rose about 2.6 percent in 2011 according to the Bureau of Labor Statistics—the boon of record affordability might be fading.

"[House hunters] have not missed the window yet—rents are still rising faster than prices and mortgage rates are still near record lows," Kolko says. "The window is closing, though, and I expect price increases will soon be outpacing wage increases, which will start to reduce affordability."

Meg Handley is a reporter for U.S. News & World Report. You can reach her at mhandley@usnews.com and follow her on Twitter at @mmhandley.