The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering the entire U.S., reported an 11.2 percent annual gain in January, up from 10.4 percent in the previous month. That is the fastest pace for home prices since 2006, the peak of the housing bubble.
The 20-city home price index rose 11.1 percent in January from a year earlier. That’s the biggest gain since March 2014. Prices rose in all 20 cities, and the 12-month increase was larger for all cities in January than in the previous month.
The increase was well above expectations.
The national index is now 29 percent above the housing bubble peak. Adjusted for inflation, however, prices are just 3 percent above the peak, according to Bill McBride of CalculatedRisk. The 20-city index is still 5 percent below the peak after adjusting for inflation.
“January’s data remain consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. It’s not yet clear whether that trend will fade as the pandemic is brought under control, Lazzara said, or if there will be a permanent shift higher in demand.
The biggest price gain was in Phoenix, where home prices jumped 15.8 percent, followed by Seattle, with a 14.3 percent gain, and San Diego, at 14.2 percent.
Home sales have jumped in the past year, driven by a desire for more space among those Americans fortunate enough to keep their jobs. With roughly one-quarter of workers doing their jobs from home, along with children going to school online, families have sought out houses rather than apartments, or moved to larger homes.
As well, shootings and murders are on the increase in many cities even as pandemic restrictions have restricted capacity or completely shut down many of the amenities—such as museums, theater, restaurants, bars, and sports arenas—that made city-living attractive. Leftwing demands to defund police and a move by mayors and prosecutors to go easy on crime means cities are likely to become more dangerous in the near future.
Yet that trend has run into a reluctance among many Americans to sell their homes — and have legions of potential buyers parade through their living rooms — during the pandemic.
The number of available homes collapsed nearly one-third by February compared with a year earlier, to just over 1 million, according to the National Association of Realtors. That’s the sharpest yearly drop on records dating back to 1982.
Higher mortgage rates may slow sales a bit in the coming months, but borrowing costs remain near historic lows. The average rate on a 30-year fixed mortgage rose to nearly 3.2 percent last week, the highest since June, up from 3.1 percent the week before. That’s still below the pre-pandemic rate of 3.5 percent.
Sales of new and existing homes fell sharply in February, mostly because of unseasonably cold winter weather and ice storms in Texas and other southern states. Yet existing home sales were still 9 percent higher in February compared with a year ago. ✪
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