Home prices in the United States rose in December at their fastest pace in nearly seven years, driven by record mortgage rates and a short supply of homes as city dwellers continued to flee to socially distant suburbs amid the COVID-19 pandemic.
Home prices rose 10.4% year-on-year in December, according to the national Case-Shiller index, the fastest since January 2014. Prices rose 0.85% month-on-month, representing the strongest increase from November to December since the records began 25 years ago.
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“December’s year-over-year change is within the top decile of all reports,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI. “The 2020 gain of 10.4% marks the best performance for home prices in a calendar year since 2013.”
The composite index of 20 cities showed that prices rose 10.1% year-on-year in December, faster than the 9.5% growth experienced in November.
Nineteen of the 20 cities in the index saw percentage gains over the past year, led by Phoenix (+ 14.4%), Seattle (+ 13.6%) and San Diego (+ 13%). The smallest gains were recorded in Chicago (+ 7.7%) and Las Vegas (+ 7.9%). Data for Detroit were not available due to insufficient records for Wayne County, the most populous county in the metropolitan area.
Low mortgage rates and a shortage of homes for sale that have served as a tailwind for housing over the past year could soon turn around and ease those price pressures, said Selma Hepp, CoreLogic’s deputy chief economist.
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“But demand from millennials and existing homeowners, who may have been on the sidelines during the pandemic, is likely to persist,” he said.