WASHINGTON – U.S. house prices rose again in October as the real estate market continues to boom after last year’s coronavirus recession.
The S&P CoreLogic Case-Shiller 20-City House Price Index, released on Tuesday, rose 18.4% year over year in October. The increase marked a slight slowdown from a 19.1% year-over-year increase in September, but was roughly in line with economists’ expectations.
All 20 cities recorded double-digit annual growth. The hottest markets were Phoenix (up 32.3%), Tampa (28.1%) and Miami (25.7%). Minneapolis and Chicago had the smallest gains, each with 11.5%. Denver was up 20.3%.
The housing market has been strong thanks to the lowest mortgage rates, limited home supply in the market, and pent-up demand from consumers blocked by the pandemic last year. Many Americans, tired of being locked in their homes during the pandemic, want to move from apartments to houses or larger houses.
“Property price growth will continue to slow, but will continue to rise, over the coming year,” said Danielle Hale, chief economist at Realtor.com. “With housing costs swallowing up a larger chunk of homebuyers’ paychecks, buyers get creative. Many will take advantage of the continued job flexibility to move to the suburbs, where many can still fetch lower square meter prices than nearby cities despite rising home prices. “
It remains unclear whether this shift is permanent or an anomaly, said Craig Lazzara, managing director at S&P Dow Jones Indices.
“We previously indicated that the strength of the US housing market will be driven in part by a change in location preferences as households respond to the COVID pandemic,” Lazzara said. “More data is needed to understand whether this surge in demand represents an acceleration in purchases that would have occurred over the next few years or reflects more permanent secular change.”
Last week, mortgage rates fell to 3.05% for the 30-year fixed rate benchmark and 2.66% for the 15-year fixed rate home loan. Persistently low interest rates signal that credit markets appear to be more concerned about the economic growth-dampening Omikron variant than about the highest inflation rates in nearly 40 years.
The National Association of Realtors reported last week that sales of previously occupied homes rose to a seasonally adjusted annual rate of 6.46 million for the third straight month in November.