The S&P CoreLogic Case-Shiller index covering home prices of all nine U.S. census divisions, reported an 8.4% increase in October from a year ago. The National Index is now up 24.5% from its former high in July 2006.
Home prices have continued to increase this year as a result of low inventory and high demand for homes. Phoenix, Seattle and San Diego reported the highest year-over-year gains in October, with price increases of 12.7%, 11.7%, and 11.6% respectively.
Craig Lazzara, managing director and global head of Index Investment Strategy at S&P Dow Jones Indices, said that it’s likely COVID-19 has pushed buyers to move from urban apartments to suburban homes.
“The surprising strength we noted in last month’s report continued into October’s home-price data,” Lazzara said. “The last time that the National Composite matched this month’s 8.4% growth rate was more than six and a half years ago, in March 2014.”
Zillow Economist Matthew Speakman said that the pace of home-price appreciation should continue “well into 2021.”
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“The path of home prices in recent months has been nothing short of remarkable,” Speakman said. “In many places across the country, and in the nation overall, home prices are growing, by some measures at their fastest pace in decades.”
Although demand for homes remains hot, existing-home sales decreased 2.5% in November, ending a five-month streak of month-over-month gains, to a seasonally adjusted annual rate of 6.85 million, according to the National Association of Realtors. Compared to last November, home sales are still up 25.8%.
“Record low mortgage rates, a wave of households aging into homeownership and a limited number of homes for sale all combined to stoke competition for houses and placed consistent upward pressure on prices for the better part of the last calendar year,” Speakman said. “These factors appear likely to remain in place in the near term, and an incrementally improving economy should encourage more buyers to enter the market.”
Larger homes have become more popular as more homeowners are working from home, becoming a main driver for construction.
Single-family housing starts saw their highest gain since 2007 in November, according to the U.S. Census Bureau. Housing starts rose 1.2% in November compared to October and are up 12.8% year over year to a seasonally adjusted annual pace of 1.58 million starts. Single-family housing starts rose 0.4% from October and 27.1% compared to last year.