In the penultimate month of 2020, house price growth in the United States reached a level not seen in almost seven years.
Standard & Poor’s said on Tuesday that its national domestic price index S&P CoreLogic Case-Shiller posted an annual gain of 9.5% in November, up from 8.4% in October. The index last reached this level in February 2014. The 20-City Composite registered an annual gain of 9.1%, compared to 8% in the previous month. The national and 20 cities exceeded the estimates of 8.85% and 8.7%, respectively, according to the consensus compiled by Bloomberg.
“The trend of accelerating house prices that started in June 2020 has now reached its sixth month with the emphatic November report,” said Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, in a press release. “As COVID-related restrictions began to dominate the economy last spring, its effect on housing prices was unclear. Price growth slowed in May and June, before starting a steady increase. The November report continues this acceleration in a particularly impressive way. “
Phoenix led the 20-City Composite for the 18th consecutive month, posting an annual gain of 13.8%, while Seattle and San Diego followed, registering a gain of 12.7% and 12.3% year on year, respectively.
“The strength of the real estate market was once again broad-based: all 19 cities for which we have November data have increased, and all 19 have earned more in the 12 months ended in November than they have gained in the 12 months ended in October”, said Lazzara.
‘A real secular shift in housing demand’
House prices continued to be fueled by historically low interest rates, record low inventories and intensified activity as a result of the pent-up demand for COVID-19 blockades and the migration from urban areas to the suburbs.
“The recent data is consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” said Lazzara. “This may represent a real secular change in the demand for housing, or it may simply represent an acceleration of the changes that would have occurred in the coming years anyway. Future data will be needed to resolve this issue. “
“The housing market continued to remain stronger than expected over the last few months of 2020, despite increases in infection rates across the country. With mortgage rates steadily falling by the end of the year and buyers realizing that the pandemic is still far from over, robust demand has not been affected by the traditional seasonal slowdown, ”said CoreLogic Deputy Chief Economist Selma Hepp, in a press release before the results were released. “And given that we are not sure when social interaction will be safe again, home buyers will continue to compete for fewer and fewer homes available for sale, which will increase house prices.”
The total inventory at the end of December was 1.07 million units, down 16.4% from the previous month and down 23% from the previous year, according to the NAR. Unsold inventory is now at a historic 1.9-month low at the current pace of sales, down from 2.3 months in November.
Although housing starts in December and building permits show that the construction of new single-family homes is proceeding at the fastest pace since 2006, the increase is unlikely to keep up with demand or offset the already reduced supply.
Experts expect house prices to end the year high and increase by 2021. According to the National Association of Realtors, the average price of existing homes in December was $ 309,800, an increase of 12.9% over compared to December 2019, as prices increased in all regions. The increase in the national price in December marks 106 consecutive months of gains year after year. And it is the highest level ever, according to the NAR.
Amanda Fung is an editor at Yahoo Finance.
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