Home prices increased at a record level in 2021, according to the S&P CoreLogic Case-Shiller US National Home Price Index. Home prices jumped by 18.8% year-over-year from December 2020 to December 2021 as people relocated amid the coronavirus pandemic. From November to December, the average cost of a new home rose by 1.5%.
The largest increase in home prices was reported in Phoenix, Arizona, which saw a 32.5% rise in prices over the past year. Tampa and Maima were second and third, with a 29.4% and a 27.3% increase, respectively.
The increased prices were driven by a record-low inventory and the ongoing supply chain issues, which has resulted in a slow-down in new home construction.
“More data will be required to understand whether this demand surge simply represents an acceleration of purchases that would have occurred over the next several years rather than a more permanent secular change,” said Craig J. Lazzara, Managing Director at S&P DJI. “In the short term, we should soon begin to see the impact of increasing mortgage rates on home prices.”
The rising prices are making it harder for new buyers to purchase a home, and in the long term, that could help bring prices down.
“Home prices continued to surpass expectations in December, but a marked change may be ahead for growth as rising mortgage rates eat into homebuyer purchasing power,” Danielle Hale, chief economist at Realtor.com, told Market Watch.
“While typical asking prices continue to accelerate, the pace of median sales price growth has slowed, signaling a potential gap between what buyers are willing and able to pay and what sellers are hoping to net,” she added.
