The S&P CoreLogic Case-Shiller index of home prices in 20 U.S. cities gained 3.9% in July from a year ago, the biggest advance since 2018, as rock-bottom mortgage rates made it possible for people to bid higher for properties.
The increase was bigger than the 3.5% advance in the prior month, and it was the largest annual gain since December 2018.
Home-loan rates, measured as a weekly average by Freddie Mac, have set new lows nine times since March when the Federal Reserve began buying mortgage-backed securities to keep credit from freezing amid the worst pandemic in more than a century. The rate was 2.9% last week, Freddie Mac said on Thursday. It was the ninth consecutive week the rate was under 3%.
“An unprecedented lack of for-sale homes combined with persistently low mortgage rates have stoked a competition for housing in recent months that will not relent,” said Matthew Speakman, a Zillow economist. “With mortgage rates poised to remain low for the near future, barring a sudden surge in inventory, it appears that upward price pressures should endure into the fall.”
Phoenix posted the biggest price gain, up 9.2% from a year ago, followed by Seattle, at 7%, and Charlotte at 6%, the report said. The smallest gain was in Chicago, up 0.8%, followed by New York, at 1.3%, and San Francisco, at 2.5%.
Home sales in the U.S. surged to a 14-year high of 6 million at an annualized pace in August, the National Association of Realtors said in a report last week.
The number of properties on the market at the end of August totaled 1.49 million, down 18.6% from the year-ago month, the report said.
Unsold inventory measured as a “months supply” number that gauges how long it would take to sell all the homes if nothing else came on the market, was three months, NAR said. Economists typically consider a four- to six-month supply to be a balanced market, with equal demand from buyers and sellers.