Finance

Home prices rise at fastest yearly pace in 1996 in February: S&P Case-Shiller

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U.S. home prices rose at their fastest annual rate since 1996 as a pandemic-fueled housing market frenzy accelerated, according to private sector data released Tuesday.

The S&P CoreLogic Case-Shiller U.S. National Home Price index rose 12 percent year over year in February, marking the fastest increase in 15 years. The index rose 11.9 percent in January.

All 20 of the major U.S. metro areas tracked by the index saw home prices rise at least 10 percent in the year since February 2020 except for Chicago and Las Vegas, which saw gains of 8.6 percent and 9.4 percent, respectively.

Phoenix’s annual increase of 17.4 percent led all other cities for the 21st consecutive month, while San Diego (17 percent) and Seattle (15.4 percent) also saw major increases. Home prices rose the highest in the West (13 percent) and Southwest (12.9 percent), reflecting long-running demographic changes.

“These data remain consistent with the hypothesis that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig J. Lazzara, managing director and global head of index investment Strategy at S&P DJI.

The sharp annual rise in the Case-Shiller index is another glimpse into how the torrid housing market fueled by the pandemic-driven recession has heated up as the economy nears a swift rebound.

Demand for houses has surged since last spring as a sharp decline in interest rates, a surge in fiscal and monetary stimulus, the widespread adoption of teleworking and COVID-19 restrictions pushed more people to move out of cities, upgrade their current homes or purchase houses in vacation areas.

The sharp increase in demand, however, has exacerbated a housing shortage that was already pushing home prices higher before the pandemic severely delayed construction and scared potential sellers away from showing their homes to prospective buyers. Soaring lumber prices have also spiked, increasing the cost of new homes and construction while pushing sale prices higher as well.

“This demand may represent buyers who accelerated purchases that would have happened anyway over the next several years,” Lazzara said.

“Alternatively, there may have been a secular change in preferences, leading to a permanent shift in the demand curve for housing. Future data will be required to analyze this question.”

Tags coronavirus housing boom COVID-19 recession Housing market

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