The payment: House prices soared again in November, according to two separate indices, which led many states to increasingly reopen businesses due to stoppages related to the coronavirus pandemic, according to a major price barometer released on Tuesday. Recent data suggests that price hikes should pick up pace in the second half of the year.
The S&P CoreLogic Case-Shiller 20-City Price Index recorded a year-on-year increase of 9.1% in November, after 8% in the previous month. On a monthly basis, the index rose 1.5% between October and November.
In addition, S&P Corelogic Case-Shiller’s broader national price index, which covers the entire country, rose 9.5% in November from 8.4% the previous month.
What happened: Prices rose in at least 19 of the 20 major cities recorded by Case-Shiller. Detroit, which is typically included in the 20-city index, has been re-banned from previous coronavirus-related shutdowns due to issues with collecting data.
Phoenix saw the largest price increase for the 18th consecutive month, rising 13.8%, followed by Seattle (12.7%) and San Diego (12.3%).
Independently of this, the Federal Housing Agency published its own monthly property price index for November. According to this report, house prices increased 1% month-over-month and 11% compared to November 2019. This is the sixth straight month that house prices have risen, with annual growth outpacing price growth from the last pre-recession housing boom, said Lynn Fisher, assistant director of research and statistics at FHFA.
The big picture: While there is evidence that demand among home buyers is slowing from levels reached this summer – as evidenced by lower mortgage application volumes – it remains very strong. In addition, the supply of houses for sale is as good as exhausted. The shortage of inventory is likely to continue to spike home prices for the foreseeable future, particularly in popular markets like Phoenix and Boise, Idaho.
With mortgage rates likely to rise in the coming months, high property prices threaten to drive many potential buyers out of the market.
What you say: “The real estate market is clearly still going strong, with starts, permits and sales of existing properties reaching more than ten highs in the past few months. Low mortgage rates and changing preferences are fueling demand, and after a decade of slump and post-breakdown consolidation, it can be argued that the market is poised for strong and sustained expansion – this could just have been the catalyst it started, ”wrote Robert Kavcic, Senior Economist at BMO Capital Markets, in a research note.