U.S. home prices grew at their fastest pace in seven years in January as supply plummeted to a new low.
The Case Shiller 20-city index posted an 11.1% year-over-year gain, up from 10.2% in the previous month, the largest jump since March 2014, while the 10-city index an annual increase of 10.9%, compared to 9.9% in the previous month. On a monthly basis, the 10 and 20-city indexes increased 0.8% and 0.9% between December and January, respectively.
Seasonally adjusted, those indexes both increased by 1.2%. In January, 19 out of 20 cities reported increases before seasonal adjustment, and all 20 cities reported increases after seasonal adjustment.
Meanwhile, the S&P CoreLogic Case-Shiller National Home Price index rose 11.2% in January, compared to 10.4% the previous month, marking the highest annual rate of price growth since February 2006.
Phoenix had the fastest home price growth for the 20th consecutive month, posting a 15.8% year-over-year increase, followed by Seattle at 14.3% and San Diego at 14.2%. The city with the slowest home price growth was Las Vegas, though it was still an impressive 8.5% year-over-year gain.
“January’s data remain consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” Craig Lazzara, managing director and global head of index investment strategy at S&P DJI, said in a statement.
Lazzara noted it is unclear whether the trend will fade as the pandemic is brought under control or if the higher demand will be a permanent shift.
The latest data comes as existing home sales fell 6.6% in February to a seasonally adjusted annual rate of 6.22 million units, according to the National Association of Realtors. However, existing home sales were still 9% higher in February compared with a year ago.
Housing inventory reached a record low of 1.03 million units as of the end of February, a 29.5% year-over-year decline compared to 1.46 million units, marking the sharpest yearly drop since NAR began collecting home inventory data in 1982.
Higher mortgage rates could 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% last week, the highest since June, up from 3.1% the week before. That’s still below the pre-pandemic rate of 3.5%
According to the Federal Housing Financy Agency's home-price index, also released on Tuesday, nationwide home prices saw a 12% increase compared to a year ago and a 1% uptick month-over-month. The FHFA reported home prices in the Mountain region rose 14.8%, in line with the regional data reported in the Case-Shiller indices.
The Associated Press contributed to this report