Home prices continued rising at an accelerated pace in February, with the largest year-over-year increase since January 2019, and month-to-month increase at its fastest pace since last June. Annual increases have been strengthening for six consecutive months.
Strong home price growth remained a function of low mortgage rates, income growth and shortage of homes for sale that persisted in the housing market prior to the economic shutdown due to the coronavirus (COVID-19) pandemic. Since home sales captured in this and next month’s release account for transactions closed prior to the implementation of shelter-in-place policies, next month is also likely to show continued strength in home price growth.
Among the 20 urban areas included in the S&P CoreLogic Case-Shiller Indexes, Phoenix continued to take the lead for the ninth consecutive month in February, with a 7.5% year-over-year increase in home prices. Seattle followed in second place at 6%, with the pace of price growth accelerating compared to last February. Conversely, New York (1.5%) and Chicago (0.7%) reported the smallest 12-month gain of the 20 metros. Las Vegas’ price growth (3.5%) slowed sharply from last February, when it topped almost 10%.
Looking forward, COVID-19 is likely to have varying impacts in housing markets across the country. In metros where job losses are higher than average, housing markets may see a larger impact from the economic shutdown, particularly if home price growth was already slowing coming into the pandemic. For example, states with the largest number of unemployment claims and slowing home-price trends include some markets in Nevada, Florida and Illinois.
Homes sold in the lower one-third of the price distribution continued to see relatively stronger appreciation than higher-priced homes, due to low for-sale inventories and competing demand from both traditional buyers and investors. Increased activity among millennial buyers is also helping drive stronger prices. On a 12-month basis, strongest growth in the lowest price tier was in Seattle (up 10%), with Atlanta, Boston and Tampa, Florida, all up 9%.
With continued shelter-in-place polices and uncertainty around post-COVID-19 economic outcomes, spring home-buying season is likely to disappoint, which may have an impact on home prices in the next several months. However, many promising signs remain, including active millennials who are benefiting from some of the lowest mortgage rates in history.
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