The price of homes spiked nationwide 1.0% over the month before, according to the latest Federal Housing Finance Agency House Price Index (FHFA HPI).
From November 2019 to November 2020, the price tag parachuted 11.0%. Meantime, the previously reported 1.5% price change for October 2020 held steady.
Probably not surprisingly, location counted. From October to November of last year, seasonally adjusted monthly house price changes ranged from +0.3% in the West South Central division to +1.6% in the Pacific division. More broadly, the 12-month changes ranged from +8.7% in the West South Central division to +14.0% in the Mountain division.
“House prices have risen by at least one percent for six consecutive months," said Dr. Lynn Fisher, FHFA's deputy director of the division of Research and Statistics. “The acceleration has been slowing but annual gains now outpace the prior housing boom. Current conditions can be explained by fundamentals, including low rates and tight housing supply, which have been intensified by the pandemic."
During downturns, house prices generally decline, not increase, and they especially don't shoot upward at extraordinarily high rates, do they? Not until now, says Joint Center for Housing Studies Fellow Don Layton, former CEO of Freddie Mac.
In a January 7 paper, Layton pointed to Federal Housing Finance Agency (FHFA) data showing that despite the severe nationwide economic downturn, its index of house prices had risen an impressive 10.2% in the 12 months leading up to October 2020, and 1.5% in just the single month of October (an annual rate of an even higher 18%).
"This is a major event that should not be shrugged off or ignored. While it could simply be a pandemic-period distortion that will disappear as COVID vaccines are broadly distributed, it could also reflect a new normal for the dynamics of housing and housing finance," Layton said. "For this reason, anyone in housing should have a view on this issue, as house price appreciation is fundamental to the economics of how families develop wealth, how much risk there is in mortgage lending, what the right business strategy is for mortgage and home construction companies, and also for government policymaking."