Home prices climb by fastest pace in 7 years

U.S. home prices rose in December at their fastest pace in nearly seven years, boosted by record-low mortgage rates and an undersupply of housing as city dwellers continued to flee to the socially distant suburbs amid the COVID-19 pandemic.

Home prices rose 10.4% year over year in December, according to the national Case-Shiller index, the fastest since January 2014. Prices rose 0.85% month over month, making for the strongest November to December increase since recordkeeping began 25 years ago.

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“December’s year-over-year change ranks within the top decile of all reports,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI. “2020’s 10.4% gain marks the best performance of housing prices in a calendar year since 2013.”

The 20-city composite index showed prices climbed 10.1% year over year in December, faster than the 9.5% growth experienced in November.

Nineteen of the index’s 20 cities saw percentage gains over the past year, led by Phoenix (+14.4%), Seattle (+13.6%) and San Diego (+13%). The smallest gains were in Chicago (+7.7%) and Las Vegas (+7.9%). Data from Detroit remained unavailable due to insufficient records from Wayne County, the most-populous county in the metro area.

The low mortgage rates and undersupply of homes for sale that have served as a tailwind for housing over the past year could soon take a turn and relieve those price pressures, said Selma Hepp, deputy chief economist at CoreLogic.

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“But, demand from millennials and existing owners, who may have been on the sidelines throughout the pandemic, is likely to persist,” she said.

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