Home prices continue to increase across the country, as the latest S&P CoreLogic Case-Shiller Home Price Index report showed a 12% annual gain in February — up from 11.2% in January. It’s the ninth straight month of increasing prices.
The 12% home price gain is the highest recorded increase since February of 2006.
The 10-city composite annual increase came in at 11.7%, up from 10.9% in the previous month. The 20-city composite posted a 11.9% year-over-year gain, up from 11.1% in the previous month.
Phoenix, San Diego, and Seattle reported the highest year-over-year home price gains among the 20 cities in February, with Phoenix leading the way with a 17.4% increase from 2020. San Diego showed a 17% increase, and Seattle showed a 15.4% increase.
Boston showed a 13.7% increase, and Tampa showed a 12.7% increase.
Nineteen of the 20 cities reported higher home price increases in the year ending February 2021 versus the year ending January 2021, per Craig J. Lazzara, managing director and global head of index investment strategy at S&P DJI.
“This data remains consistent with the hypothesis that COVID-19 has encouraged potential buyer to move from urban apartments to suburban homes,” Lazzara said. “It also represents buyers who accelerated purchases that would have happened anyway over the next several years.”
Every region of the country logged double-digit gains in home prices, led by the West (+13%) and the Southwest (+12.9%).
The Federal Housing Finance Agency House Price Index also reported a 0.9% increase. For the nine census divisions, seasonally adjusted monthly house price changes from January 2021 to February 2021 ranged from a 0.3% increase in the Middle Atlantic division, to a 1.6% increase in the Mountain division. The 12-month changes ranged from a 10.5% increase in the West North Central division to a 15.4% increase in the Mountain division.
Mortgage rates dropped below 3% last week for the first time in two months — down seven basis points to 2.97%, according to Freddie Mac’s Primary Mortgage Market Survey. Those low rates, combined with low inventory, are driving insane bidding wars, said Zillow Economist Matthew Speakman.
“Home price appreciation pressed higher in February as competition for housing remained red hot,” Speakman said. “As more signs emerge that the economy’s recovery is gathering steam, a wave of eager buyers, many of them seeking their first home purchase, remain determined to find their next home. But with relatively few for-sale homes on the market, bidding wars have become increasingly common, pushing sale prices higher and leading homes to sell at a record pace.”
Speakman said it appears “unlikely” that these upward price pressures will relent — particularly as recent drops in mortgage rates are offering home shoppers increased buying power.
“Some recent signs suggest that the historically tight inventory pressures may finally be starting to ease,” he said. “Should those signs materialize, the meteoric rise in home prices may finally have a reason to come back down to earth. For now, red hot home price appreciation shows few signs of cooling.”