It seems like home prices can only go up. At least for the time being.
Two indexes updated Tuesday showed prices continued to climb in the last months of 2020, in one case by record margins. In the fourth quarter, prices were 3.8% higher than the previous period and 10.8% higher than a year earlier, according to the Federal Housing Finance Agency’s (FHFA) Home Price Index, which has never seen such large increases.
The S&P CoreLogic Case-Shiller Index, meanwhile, posted a 10.4% annual gain, the biggest since 2013. Month-over-month, that index rose a seasonally-adjusted 1.3% in December.
The two reports put an exclamation mark on what has by all indications been an unexpectedly strong year for the real estate market in the generally downtrodden economy. Mortgage rates, hovering below 3% since November, have provided a solid launchpad for the soaring market, which shows no sign of slowing in spite of the rising sale prices and a recent uptick in rates.
With some sellers on the sidelines, inventories have dropped down to threadbare levels, though even that's not dissuading buyers. (And one recent survey showed seller interest could change when vaccinations become widespread.)
“Low mortgage rates, pent up demand from homebuyers, and a limited housing supply propelled every region of the country to experience faster growth in 2020 compared to a year ago despite the pandemic,” said Lynn Fisher, deputy director of the FHFA’s Division of Research and Statistics, in a press release.
The data suggests buyers who are able to telecommute are seeking refuge from the COVID-19 pandemic and taking off to the suburbs, Craig J. Lazzara, managing director and global head of Index Investment Strategy at S&P Dow Jones Indices, said in a separate statement.