S&P Dow Jones Indices has announced the latest results from its S&P CoreLogic Case-Shiller Indices for September 2021, reported an annual gain of 19.5% in home prices, down slightly from 19.8% the previous month. The 10-City Composite annual increase was found to be 17.8%, down from 18.6% in the previous month. The 20-City Composite posted a 19.1% year-over-year gain, down from 19.6% in the previous month.
“If I had to choose only one word to describe September 2021’s housing price data, the word would be ‘deceleration,’” said Craig J. Lazzara, Managing Director at S&P DJI. “Housing prices continued to show remarkable strength in September, though the pace of price increases declined slightly. The National Composite Index rose 19.5% from year-ago levels, with the 10- and 20-City Composites up 17.8% and 19.1%, respectively. This month, however, the rate of price growth began to decline, as each of our three composites rose less in September than in August.”
Regionally, Phoenix, Tampa, and Miami reported the highest year-over-year gains among the 20 cities reported on in September. Phoenix led the way with a 33.1% year-over-year price increase, followed by Tampa with a 27.7% increase, and Miami with a 25.2% increase. Six of the 20 cities reported higher price increases in the year ending September 2021 versus the year ending August 2021.
“Phoenix’s 33.1% increase led all cities for the 28th consecutive month,” added Lazzara. “Tampa (+27.7%) rose to second place in September, and Miami (+25.2%) edged out Dallas, San Diego, and Las Vegas for the bronze medal. Prices were strongest in the South (+24.3%), and the Sunbelt (+24.2%), but every region logged double-digit gains.”
Contributing to the gains in home prices is the continued shortage of homes nationwide. Increased competition is forcing bidding wars to begin once again, as 60.3% of all offers written by Redfin in October experienced a bidding war, down slightly from the 60.4% in September. Redfin anticipates this number to plateau, if not trend upwards, as homebuyer demand has remains elevated.
“In addition to seasonal slowing in the housing market, recent S&P CoreLogic Case-Schiller data suggests that the monthly rate of home price acceleration has similarly decelerated since the summer peak,” said CoreLogic Deputy Chief Economist Selma Hepp. “Nevertheless, home prices continue to post near 20% annual gains. However, the slowing of monthly price acceleration while home purchase activity remains strong suggests that the market is trending toward a healthier balance between buyers and sellers. In the coming months, we are likely to see a continued slowing of monthly and annual home price gains while total 2021 home purchases will outpace last year’s purchases.”
Part of that market slowing will depend on the direction that mortgage rates take in the coming months. After the Fed announced it would scale back the purchase of billions in government bonds and other assets monthly, rates have risen, yet remain around the 3% mark. With rates at such a low mark, more prospective buyers are clamoring for nation’s short supply.
“We have previously suggested that the strength in the U.S. housing market is being driven by households’ reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes,” noted Lazzara. “More data will be required to understand whether this demand surge represents simply an acceleration of purchases that would have occurred over the next several years, or reflects a secular change in locational preferences. September’s report is consistent with either explanation.”
The proliferation of work from home opportunities has allowed many to continue to find housing in the rental market which too has been impacted by rising monthly costs. Redfin recently reported that the average national rent price increased 13% year-over-year in October 2021. While past data has showed that the rate at which rent and mortgage payments increased was converging on each other, the rise in home prices and interest rates accelerated average monthly mortgage prices over the last month leading to additional growth.
“Today’s S&P Case Shiller Index spotlights an early fall housing market with fewer families actively looking for homes after the start of a new, and mostly in-person, school year,” said Realtor.com Manager of Economic Research George Ratiu. “Home prices remained elevated, but the pace of gains moderated, as an increase in new listings offered buyers more options. The other factor contributing to slowing price growth was the jump in mortgage rates, with Freddie Mac’s 30-year fixed loan moving from 2.87% at the start of September to 3.01% by the end of the month, curbing many buyers’ ability to bid up prices.”