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Home Prices Continue Upward Acceleration

The latest S&P CoreLogic Case-Shiller Indices from S&P Dow Jones has found that for January 2021, home prices continue to increase across the U.S., an 11.2% annual gain, up from 10.4% in December 2020. The 10-City Composite annual increase came in at 10.9%, up from 9.9% in the previous month. The 20-City Composite posted an 11.1% year-over-year gain, up from 10.2% in the previous month.

According to the report, the National Composite's 11.2% gain is the highest recorded since February of 2006, just one month shy of 15 years ago.

Phoenix, Seattle, and San Diego continued to report the highest year-over-year gains among the 20 cities in January, with Phoenix leading the way with a 15.8% year-over-year price increase, followed by Seattle with a 14.3% increase, and San Diego with a 14.2% increase.

"The strong price gains that we observed in the last half of 2020 continued into the first month of the new year. In January 2021, the National Composite Index rose by 11.2% compared to its year-ago levels," said Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. "The trend of accelerating prices that began in June 2020 has now reached its eighth month and is also reflected in the 10- and 20-City Composites (up 10.9% and 11.1%, respectively). The market's strength is broadly-based: all 20 cities rose, and all 20 cities gained more in the 12 months ended in January 2021 than they had gained in the 12 months ended in December 2020.

A number of factors continue to play into the rise in home prices nationwide, as short supply and high demand are driving prices upward to new all-time marks. Sellers continue to reap the rewards financially as more homebuyers are competing for an ever-shrinking piece of the pie.

CoreLogic’s Home Equity Report for Q4 2020 found that homeowners with mortgages have seen their equity rise by 16.2% year-over-year, a gain of $1.5 trillion-plus in equity, and an average gain of $26,300 per homeowner, since Q4 of 2019.

“The housing market momentum that had picked up pace at the end of 2020 spilled over into the early months of 2021, upending the traditionally slow homebuying season,” said CoreLogic Deputy Chief Economist Selma Hepp. “Further declines in mortgage rates—which hit all-time lows at the end of December—helped carry the strong momentum, but also amplified demand from millennials and those seeking second homes. Additionally, housing inventories are not showing any signs of improvement. In fact, data shows they are reaching historical troughs, which is putting additional pressure on home prices. Recent pick-up in mortgage rates over the past few months may be reflected in slowed home price growth later this year.”

Realtor.com Chief Economist Danielle Hale agrees that the rise in rates may put a damper on the homebuying plans of many as 2021 moves onward.

“We expect time on market and price gains to moderate as we approach spring, and more sellers put homes up for sale, but potential buyers will face new challenges later in the year,” said Hale. “Namely, rising mortgage rates will cause housing costs to take a bigger bite out of homebuyer paychecks, or, to keep monthly payments the same, homebuyers will have to lower their home price target.”

About Author: Eric Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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