A home sale sign for real estate shows the home is under contract on November 19, 2020 in Washington, DC.
Saul Loeb | AFP | Getty Images
December is usually the slowest month for the property market, but price gains haven't slowed down a bit in 2020. In fact, they rose at the fastest pace in seven years.
Property prices rose 10.4% nationwide from December 2019, according to the S&P CoreLogic Case-Shiller Property Price Indices.
This is the strongest annual growth rate in over six years, and a significantly stronger gain than in November, when prices rose 9.5%. It is also one of the largest annual increases in the index's 30-year history.
The annual increase of 10 cities was 9.8% after 8.9% in November. The 20-city network recorded an increase of 10.1% compared to 9.2% in the previous month. Detroit has been banned due to Covid-related data collection issues.
"The 10.4% increase in 2020 marks the best performance in house prices in a calendar year since 2013," said Craig Lazzara, managing director and global head of index investment strategy for S&P Dow Jones Indices. "From the perspective of more than 30 years of S&P CoreLogic Case-Shiller data, the December year-over-year change is in the top decile of all reports."
Phoenix, Seattle and San Diego continued to see the largest price increases among the 19 cities studied. Phoenix prices rose 14.4% year over year. They rose 13.6% in Seattle and 13.0% in San Diego. Eighteen of the 19 cities reported higher price increases in the twelve months to December 2020 than in the twelve months to November 2020.
"These data agree with the view that Covid has encouraged potential buyers to move from urban apartments to suburban homes. This could indicate a mundane shift in housing demand or simply an acceleration of the moves that would have occurred over the next few years Years anyway, "added Lazzara.
Property prices started to see big gains last summer as Covid-driven demand from stay-at-home culture declined to the property market. Record low supply combined with record low mortgage rates led to bidding wars against homes across the country.
Mortgage rates rose sharply last week, which will hurt affordability for the spring 2021 market. Prices generally lag behind sales. So if sales suffer, then the market prices are unlikely to cool significantly over several months.