Home prices are rising at the fastest pace since the Great Recession, price barometers show

Home prices are rising at the fastest pace since the Great Recession, price barometers show

The numbers: Home prices rocketed at a fast pace
yet again in November, according to two separate indexes, making it increasingly
 as many states began reopening
businesses from shutdowns related to the coronavirus pandemic, according to a
major price barometer released Tuesday. Recent data suggests price appreciation
should gain steam in the latter half of the year.

The S&P CoreLogic Case-Shiller 20-city price index posted
a 9.1% year-over-year gain in November, up from 8% the previous month. On a
monthly basis, the index increased 1.5% between October and November.

Additionally, the broader S&P Corelogic Case-Shiller
national price index, which covers the entire country, demonstrated a 9.5% gain
year-over-year in November, up from 8.4% the prior month.

What happened: Prices
rose in at least 19 of the 20 large cities tracked by Case-Shiller. Detroit,
which is typically included in the 20-city index, was again excluded because of
issues collecting data during previous coronavirus-related shutdowns.

Phoenix experienced the largest price increase for the 18th consecutive
month with a 13.8% increase, followed by Seattle (12.7%) and San Diego (12.3%).

Separately, the Federal Housing Finance Agency released its
own monthly home price index for November. According to this report, home
prices were up 1% from the previous month and 11% from November 2019. This is
the sixth consecutive month in which home prices have risen, and annual gains
are now outpacing the price growth seen during the last housing boom before the
Great Recession, said Lynn Fisher, deputy direction of the division of research
and statistics at the FHFA.

The big picture: While
there may be evidence that demand among home buyers is waning from the heights
reached this summer — as evidenced by lower mortgage application volumes — it
still remains very strong. Plus, the supply of homes for sales is all but
exhausted. The lack of inventory should continue to fuel home-price increases
for foreseeable future, especially in popular markets such as Phoenix and
Boise, Idaho.

But with mortgage rates potentially rising in the months to
come, high home prices will threaten to push many prospective buyers out of the

What they’re saying: “The
housing market is clearly still running strong, with housing starts, permits
and existing home sales all notching decade-plus highs in
recent months. Low mortgage rates and shifting preferences are stoking demand,
and after a decade-long slump and consolidation following the housing bust, one
can make the argument that the market is primed for a strong and prolonged
expansion—this might have just been the catalyst to get it started,” Robert
Kavcic, senior economist at BMO Capital Markets, wrote in a research note.

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