Housing

Home Prices in This Huge Housing Market Skyrocketed Last Year

Home prices rose across America last year, fueled by low mortgage rates, rising income among the middle and upper classes, and the urge many people felt to leave cities on both coasts as COVID-19 spread.

Across the United States, home prices have risen by 10%, based on most data. Places like New York City have not been so fortunate. People, particularly the wealthy, have moved to areas close by. In areas such as nearby Fairfield County, Connecticut, home prices in some small cities increased by 50%. Meanwhile, in New York City, high-end coops and condo prices fell by 15% to 20% in many neighborhoods.

The gold standard of home price data is Case-Shiller, recently renamed the S&P CoreLogic Case-Shiller Home Price Indices. Its data for December 2020 and the full year 2020 were just released. Home prices across the nation rose 10.4%. Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI commented about the pace: “The trend of accelerating prices that began in June 2020 has now reached its seventh month and is also reflected in the 10- and 20-City Composites (up 9.8% and 10.1%, respectively).”

Case Shiller also provides data for the 20 largest cities. Last year, prices skyrocketed in Phoenix, the sixth-largest metropolitan area in the country. Its population is 4,948,203, after having risen 18% in the past 10 years. Prices in the market were up by 14.4% in that time.

Seattle was second to Phoenix in home price growth at 13.6%.

The markets that did poorly compared to the national number were Chicago, which was up 7.7%, and Las Vegas, which was up 7.9%. It is only speculation, but the Las Vegas economy has been decimated by a drop-off in tourism because of the pandemic.

Case-Shiller also looks at markets based on their relative price to one another. When first begun in January 2000, each market was given an index of 100. Cleveland has risen the least to a 155 index. Los Angeles is the highest at 317. What the analysis does not take into account is the extent to which affordability is a factor in rising or falling home prices by market.

Lazzara closed by saying COVID-19 could continue to be a driving factor:

These data are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes. This may indicate a secular shift in housing demand, or may simply represent an acceleration of moves that would have taken place over the next several years anyway.