Home prices rose at a record pace in 2021, as the pandemic-related housing shift, rising urban murder rates, and very low interest rates prompted Americans to scramble for houses.
The S&P CoreLogic Case-Shiller National Home Price Index jumped 18.8 percent last year, according to data released Tuesday. This is the biggest full-year increase since the index was launched in 1987.
The pandemic ignited a housing boom in the United States. Many Americans decided they wanted more space to work and school from home. The major anti-policing protests, which often developed into rioting and looting, of 2020 and the resulting rise in violent crime pushed many families out of city centers. Urban living also became less attractive and easier to give up when many amenities–such as restaurants, bars, theaters, and museums–were shuttered for months at a time.
It remains to be seen how much of the home buying of the last eighteen months was pulled forward from the future. In any case, the housing market is likely to cool as mortgage rates climb. But there is no sign that home prices will fall in most areas.
Mortgage rates have climbed ahead of the Fed’s plan to raise its interest rate target. The thirty-year mortgage is up almost a full percentage point since the year began. Some of the buying activity at the end of last year may have been prompted by purchasers scrambling to lock in a low rate before the rise expected for 2022.
The Case-Shiller 10-city index, which tracks home prices around the biggest metro areas, gained 17 percent over the year ended in December, up from a gain of 16.9 percent in November. The 20-city index rose 18.6 percent, up from 18.3 percent.
Economists had expected the 20-city index to rise 18 percent, according to Econoday.
Home prices rose 1.1 percent in December compared with the prior month, also more than expected and an acceleration from the one percent gain in November.
Price rose in 15 of the 20 metro areas tracked. The biggest gains were in Phoenix, where home prices are up 32.5 percent, and Tampa, up 29.4 percent.
Surging prices have been making it more difficult for people to buy a first home. The share of first-time buyers sank to 27 percent in January, down from 33 percent a year ago.
Sharply higher prices of materials and difficulty finding workers have caused some home builders to pull back on projects, worsening the short supply of homes for sale.
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