The S&P CoreLogic Case-Shiller National Home Price Index for December went live Tuesday, revealing a 10.4% surge, the first double-digit increase since January 2014. The property- data company's Chief Economist Selma Hepp says that, considering a full year of data, this index reinforced the well-established fact that 2020 was an unprecedented year for the housing market (as for every other aspect of our daily lives).
"In December, the index surged at 10.4%—the first double-digit increase since January 2014. The month-to-month index also increased 0.85%, making it the strongest November- to-December increase since the data series began," said Hepp, whose statement coincided with the report. "The momentum in buyer demand that picked up speed during the second half of the year propelled through the end of the year, and seemingly into 2021."
She went on to say that acceleration in price growth is largely driven by record-low mortgage rates and the severe undersupply of for-sale homes.
"[Those] two factors that may take a turn this year and relieve some of the price pressure. But, demand from millennials and existing owners, who may have been on the sidelines throughout the pandemic, is likely to persist.”
Realtor.com's Senior Economist George Raitu says real estate markets have seen continuing declines in the number of homes for sale since the last quarter of 2020, dropping below 600,000 in January of this year.
"With buyer interest leading to an unseasonably competitive landscape, where multiple bids and contingency waivers remain the norm, home prices remain on a steep upward trend, he said. "Meanwhile, interest rates have been slowly moving upward, as vaccine rollouts and declining number of new COVID cases boost investor optimism. The rise in mortgage rates has been putting a dent in affordability for many buyers, setting the stage for a challenging next few months, as consumer incomes have not kept pace with home price gains. The economy needs more jobs, while housing needs significant new construction to alleviate the looming challenges."
The Federal Housing Finance Agency House Price Index (FHFA HPI) showed U.S. house prices rose 10.8% fromQ4 of 2019 to the fourth quarter of 2020. House prices were up 3.8% compared to the third quarter of 2020. FHFA's seasonally adjusted monthly index for December was up 1.1% from November.
"House prices nationwide recorded the largest annual and quarterly increase in the history of the FHFA HPI," said Lynn Fisher, Deputy Director of FHFA's Division of Research and Statistics. “Low mortgage rates, pent-up demand from homebuyers, and a limited housing supply propelled every region of the country to experience faster growth in 2020 compared to a year ago despite the pandemic. In particular, house prices in western states and cities saw the highest rates of growth, where annual gains often rose above 10%."