Low mortgage rates drive up home prices

Home prices in 20 U.S. cities gained in July, pushed higher by demand for housing that has been fueled by low mortgage rates.

The S&P CoreLogic CaseShiller index of property values increased 3.9% from 2019, beating the estimate of 3.6%. It was the biggest year-overyear increase since December 2018.

“Home prices continued to push pandemic-related uncertainties aside and reach new heights into the summer months, as demand for housing outpaced supply,” said economist Matthew Speakman of the real estate firm Zillow. “An unprecedented lack of for-sale homes combined with persistently low mortgage rates have stoked a competition for housing in recent months that will not relent.”

The housing market has been an unexpected bright spot for the U.S. economy, with Americans eager to take advantage of record-low mortgage rates. A shortage of inventory has helped prop up prices, particularly as Ameri- cans look for more space to spread out.

“With buyer demand showing no signs of a slowdown, as well as limited inventory, more price increases are inevitably on the horizon,” said Danielle Hale, chief economist at Realtor.com.

The biggest increases came in Phoenix (9.2%), Seattle (7%) and Charlotte in North Caroline (6%). New York (1.3%), Chicago (0.8%) and San Francisco (2.5%) had the smallest gains in July among the 20 cities tracked by the index.

Still, prices were up in those cities, even as the pandemic created anxiety about dense urban living. The pandemic has fueled a narrative that Americans are fleeing cities for the suburbs.

And while some residents have departed high-cost locations, including New York and San Francisco, the death of urban living is a “myth,” according to a research note from Barclays.

The higher homes prices come as the available inventory of properties to buy is tight. Some sellers are reluctant to list during a pandemic, while homebuilders are being cautious as they grapple with high lumber costs.

And while homebuying stalled when the pandemic first hit, real estate is showing strength even with high unemployment and mounting bankruptcies putting the economic recovery on shaky ground.

“The housing market has withstood basically every obstacle that the pandemic has thrown its way,” Speakman, said. “It appears that upward price pressure should endure into the fall.”