Last year was the best of times for homeowners and the worst of times for those aspiring to own homes, according to a leading measure of home prices in major US metropolitan areas. The S&P CoreLogic Case-Shiller National Home Price Index was up 18.8% for the year, the biggest rise since the index began in 1987, the Wall Street Journal reports. The index rose 10.1% in 2020. Prices went up in every region but the biggest increases were in the South and Southeast, which were both up more than 25%, reports CNN. Phoenix had the biggest gain in the 20-city index, with prices up 32.5% year-on-year. Tampa and Miami were in second and third place.
The smallest annual gains were in Chicago, Minneapolis, and Washington, DC, though they were still up around 11%, per CNBC. The National Association of Realtors says that along with low interest rates, a huge shortage of new homes led to bidding wars that pushed prices to new highs, the Journal reports. The association says first-time buyers are finding it very difficult to compete with investors and the share of first-time buyers in the market was just 27% last month. Analysts say that rising mortgage interest rates are likely to slow down the rise in prices, but not reverse it.
"A marked change may be ahead for growth as rising mortgage rates eat into homebuyer purchasing power," says Realtor.com chief economist Danielle Hale, per CNN. Hale notes that since Dec. 2020, higher mortgage rates have added around $200 to the monthly cost of a new homes—and most of the increase has been since mid-December last year. But at the same time, Hale says, "pandemic trends like workplace flexibility and competitive labor market conditions to give workers the boost in income and wider search areas they need to navigate a still-challenging housing market successfully." (Last year, the median home price in the US topped $350,000 for the first time.)