In December, home prices increased by 10.4 percent year over year, according to the monthly S&P/Case-Shiller U.S. National Home Price Index, released Tuesday.
Up from 9.5 percent growth in November, home prices continued a steady upward trend fueled by inventory shortages and low mortgage rates that, despite early analyst predictions, were largely unaffected by the pandemic.
“The trend of accelerating prices that began in June 2020 has now reached its seventh month and is also reflected in the 10- and 20-City Composites (up 9.8 percent and 10.1 percent, respectively),” said Craig Lazzara, managing director and Global head of Index Investment Strategy at S&P Dow Jones Indices. “The market’s strength continues to be broadly-based: 18 of the 19 cities for which we have December data rose, and 18 cities gained more in the 12 months ended in December than they had gained in the 12 months ended in November.”
Historically low inventory all across the country is leading to the kind of fast-paced value appreciation observed for months as buyers try to score a limited number of homes by making higher offers. Phoenix, Seattle and San Diego saw the greatest increases in home prices at 14.4, 13.6 and 13 percent, respectively.
“Persistent buyer demand amid severely undersupplied housing market has undeniably pushed home prices to new highs in 2020,” CoreLogic Deputy Chief Economist Selma Hepp said in a statement. “Continual decline in mortgage rates to new record lows, particularly in December, has also helped expand the affordability box for some buyers and allowed them to bid up prices higher than they would have been able to if rates were higher – also further accelerating price growth. In looking ahead to 2021, pressure on home prices will likely remain strong until either mortgage rates increase or more homes are available for sale.”
The S&P/Case-Shiller U.S. National Home Price Index is “a composite of single-family home price indices that is calculated every month; the indices for the nine U.S. Census divisions are calculated using estimates of the aggregate value of single-family housing stock for the time period in question.”