A “For Sale” sign outside a home in West Palm Beach, Florida, April 7, 2021.

Marco Bello | Bloomberg | Getty Images

Home price increases continue to exceed expectations as tight supply and strong demand lead to bidding wars.

According to the S&P CoreLogic Case-Shiller Property Price Index, prices rose 12% year over year in February from 11.2% in January.

The 10-city network rose annually by 11.7% compared to 10.9% in January. The 20-city network increased by 11.9%, after 11.1% in the previous month. All profits were in double digits with the exception of Chicago and Las Vegas.

“National Composite’s 12% gain is its highest since February 2006, exactly 15 years ago, and is comfortably in the top decile of historical performance,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI. “The price increases in February in each city are above the median for that city and are in the top quartile of all reports in 18 cities.

The cities with the largest growth rates continue to be Phoenix, San Diego and Seattle. Prices in Phoenix rose 17.4% year over year, followed by San Diego, which was up 17%, and Seattle, which was up 15.4%. Nineteen of the 20 cities saw higher price increases in February through 2021 than in January.

Prices rose significantly, although mortgage rates also rose sharply during the month. The average interest rate on the popular 30-year fixed-rate mortgage started at 2.79% in February and ended at 3.27%, according to the Mortgage News Daily.

The strong demand and the record low supply are driving up prices. Redfin said there were bidding wars in more than half of the houses under contract during the month. Also, according to the National Association of Realtors, homes are now selling in about half the time they were a year ago.

Even as vaccines become more widespread and Americans return to the economy, the desire for bigger living spaces with more outdoor facilities doesn’t seem to be diminishing.

“That demand could represent buyers who have sped up purchases that would have been made over the next several years,” Lazzara said. “Alternatively, there could have been a secular change in preferences that has resulted in a permanent shift in the demand curve for housing. Future data will be needed to analyze this question.”