Home prices rose by nearly 19% in 2021, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index.
The 18.8% jump is the largest increase notched in the 34 years that the record has been kept. The cities that experienced the most price growth were Phoenix, Tampa, and Miami, which saw 32.5%, 29.4%, and 27.3% growth, respectively. The price growth coupled with rising mortgage rates has made it less affordable to buy homes.
“We continue to see very strong growth at the city level. All 20 cities saw price increases in 2021, and prices in all 20 are at their all-time highs,” said Craig Lazzara, the managing director and global head of index investment strategy at S&P DJI. “December’s price increase ranked in the top quintile of historical experience for 19 cities and in the top decile for 16 of them.”
The housing market has been red-hot over the past year as the Federal Reserve held its target for interest rates at near-zero levels and demand exploded due in part to massive federal spending.
HOUSING LESS AFFORDABLE AS MORTGAGE RATES RISE IN ANTICIPATION OF FED ACTION
Existing home sales increased 6.7% last month from December to a seasonally adjusted annual rate of 6.5 million, much more than was expected, the National Association of Realtors reported last week.
In the face of spiraling inflation, the central bank is now planning several rate hikes this year and is even weighing a half-percent rate hike next month, which would be the first time the Fed took such a drastic move in more than two decades.
Mortgage rates are quickly rising in anticipation of the central bank’s action, with the average rate on a 30-year loan now at 3.92%, up from a level of 3.69% last week. The last time mortgage rates were higher was in May 2019.
A big driver behind why there is an explosive demand for homes despite the rising mortgage rates is that people are looking to lock in mortgages now before interest rates are hiked. After they are raised, demand for homes is expected to fall, the National Association of Realtor’s housing and commercial research director, Gay Cororaton, told the Washington Examiner last week.
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More generally, inflation has been a scourge for consumers across the country. Consumer prices grew by 7.5% in the 12 months ending in January, the fastest pace of inflation since 1982 and more than expected, according to the Bureau of Labor Statistics.
