Real estate agent Rebecca Van Camp is putting a “Sold” sign on her sign outside a home in Meridian, Idaho on Wednesday, October 21, 2020.
In it Oswald | Tribune News Service | Getty Images
The sharp rise in property prices is not slowing down thanks to high buyer demand and the record low supply of properties for sale.
According to the S&P CoreLogic Case-Shiller Home Price Indices, prices rose 9.5% nationwide in November compared to November 2019. This is the strongest annual growth rate in over six years, and a significantly stronger gain than in October, when prices rose 8.4%. It is also one of the largest annual increases in the history of the index.
The annual price increase for 10-City Composite was 8.8% after 7.6% in October. The 20-City Composite recorded a year-on-year increase of 9.1% compared to 8.0% in the previous month. Detroit has been ruled out, however, as data reporting issues persist due to the pandemic.
“The latest data agrees with the view that COVID has encouraged potential buyers to move from urban housing to suburban homes,” said Craig Lazzara, managing director and global head of indexing strategy for S&P Dow Jones Indices. “This may represent a real worldly shift in housing demand, or simply an acceleration of the movements that would have happened over the next few years anyway. Future data will be needed to answer that question.”
Phoenix, Seattle and San Diego continued to show the strongest price increases of all major markets in November. Phoenix led the way with a year-over-year price increase of 13.8%, followed by Seattle with a 12.7% increase and San Diego with a 12.3% increase. All 19 cities recorded higher price increases in the year up to the end of October than at the end of October.
Prices were driven not only by supply and demand, but also by record-low mortgage rates. The average rate on the popular 30-year fixed-rate mortgage, which started back in November, continued to fall during the month, hitting a low of 2.79% by December 1, according to Mortgage News Daily.
House prices typically lag behind sales trends, and home sales have been somewhat weaker in recent months. However, the normal historical trends may not hold as sales are slower mainly due to poor supply and non-weak demand. It remains to be seen how much higher prices will scare off buyers as sales of newly built homes continue to be strong and they are selling to existing homes at a premium.
Builders have been ramping up production recently, which could throw a little cold water on these very hot prices.
“Our outlook for 2021 is of a possible moderation in price hikes as home construction picks up and the widespread availability of COVID vaccines brings more flexible sellers back to the real estate market. However, it will be some time before these changes remedy,” said Danielle Hale. Chief Economist at realtor.com.