WASHINGTON—U.S. home prices surged at the fastest pace in nearly seven years in December, fueled by low mortgage rates and Americans moving to houses in the suburbs from crowded urban areas.
The S&P CoreLogic Case-Shiller 20-city home price index, released on Feb. 23, climbed 10.1 percent in December from a year earlier. The year-end jump was the biggest since April 2014 and follows a strong 9.2 percent year-over-year gain in November.
Home prices climbed 14.4 percent in Phoenix and 13.6 percent in Seattle in December. But prices rose all over. Chicago, which recorded the slowest price gain, saw a 7.7 percent uptick. Detroit was not included in the year-over-year figures because of record-keeping delays caused by the coronavirus pandemic.
“These data are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig Lazzara, global head of index investment strategy at S&P Dow Jones Indices. But he said it was unclear whether the trend would last.
Prices have also been pushed up by the limited supply of homes on the market.
“With mortgage rates remaining relatively low and the wave of eager buyers continuing to swell, it’s unlikely that this competition for housing, and subsequent strong price appreciation, will meaningfully abate in the near future,” said Matthew Speakman, economist at the real estate firm Zillow.
Homebound consumers are also sprucing up their living quarters. Commenting on a year-end surge of revenue and earnings at Home Depot, Neil Saunders of GlobalData calculated that Americans each spent the equivalent of $402 last year at the home-improvement giant.
The housing market has been resilient throughout the coronavirus pandemic, helped by rock-bottom rates on home loans. The average rate on the benchmark 30-year, fixed-rate mortgage ticked up to 2.81 percent last week from 2.73 percent but remains well below where it was a year earlier: 3.49 percent.
But the Commerce Department reported Feb. 18 that U.S. home construction fell 6 percent in January, dragged down by a 12.2 percent drop in construction of single-family homes; apartment construction climbed 16.2 percent. Still, applications for building permits, which typically signal where home building is headed, rose sharply in January.