Home prices in the United States rose again in October as the housing market continues to grow following last year’s coronavirus recession.
The S&P CoreLogic Case-Shiller Home Price Index in 20 cities, released on Tuesday, was up 18.4% in October from a year earlier. The gain marked a slight deceleration from a 19.1% year-over-year increase in September, but was roughly in line with what economists expected.
All 20 cities posted double-digit annual gains. The hottest markets were Phoenix (up 32.3%), Tampa (28.1%) and Miami (25.7%). Minneapolis and Chicago posted the smallest increases, 11.5% each.
The housing market has been strong thanks to the lowest mortgage rates, a limited supply of housing in the market and pent-up demand from consumers stranded by the pandemic last year. Many Americans, tired of being locked in their homes during the pandemic, are looking to move from apartments to houses or larger homes.
“Home price growth will slow down further over the coming year, but will continue to increase,” said Danielle Hale, chief economist at Realtor.com. “As housing costs take up a larger share of homebuyers’ paycheques, buyers will get creative. Many will take advantage of the continued flexibility of the workplace to relocate to the suburbs where, despite increases in house prices, many can still find a price per square foot lower than in neighboring towns. ”
It’s still unclear whether this change is permanent or an aberration, said Craig Lazzara, managing director of S&P Dow Jones Indices.
“We previously suggested that the strength of the US real estate market was due in part to a change in location preferences as households respond to the COVID pandemic,” Lazzara said. “More data will be needed to understand whether this increase in demand represents an acceleration in purchasing that would have occurred in the next few years, or reflects a more permanent secular change. “
Last week, mortgage rates fell – to 3.05% for the 30-year fixed-rate benchmark home loan and to 2.66% for the 15-year fixed-rate home loan. Still low rates indicate that credit markets seem more concerned with the omicron variant that depresses economic growth than with the highest inflation rates in nearly 40 years.
The National Association of Realtors reported last week that sales of previously occupied homes increased for the third consecutive month in November at a seasonally adjusted annual rate of 6.46 million.