U.S. home prices rose in December at their fastest pace in nearly seven years, boosted by record-low mortgage rates and an undersupply of housing as city dwellers continued to flee to the socially distant suburbs amid the COVID-19 pandemic.
Home prices rose 10.4% year over year in December, according to the national Case-Shiller index, the fastest since January 2014. Prices rose 0.85% month over month, making for the strongest November to December increase since recordkeeping began 25 years ago.
“December’s year-over-year change ranks within the top decile of all reports,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI. “2020’s 10.4% gain marks the best performance of housing prices in a calendar year since 2013.”
The 20-city composite index showed prices climbed 10.1% year over year in December, faster than the 9.5% growth experienced in November.
Nineteen of the index’s 20 cities saw percentage gains over the past year, led by Phoenix (+14.4%), Seattle (+13.6%) and San Diego (+13%). The smallest gains were in Chicago (+7.7%) and Las Vegas (+7.9%). Data from Detroit remained unavailable due to insufficient records from Wayne County, the most-populous county in the metro area.
The low mortgage rates and undersupply of homes for sale that have served as a tailwind for housing over the past year could soon take a turn and relieve those price pressures, said Selma Hepp, deputy chief economist at CoreLogic.
“But, demand from millennials and existing owners, who may have been on the sidelines throughout the pandemic, is likely to persist,” she said.