U.S. home prices soared in January, 20-city index shows

WASHINGTON — U.S. home prices in January increased at the fastest pace in seven years as the pandemic fuels demand for single-family houses even as the supply for such homes shrinks.

The S&P CoreLogic CaseShiller 20-city home price index, released Tuesday, rose 11.1% in January from a year earlier. That’s the biggest gain since March 2014. Prices rose in all 20 cities, and the 12-month increase was larger for all cities in January than in the previous month.

“January’s data remain consistent with the view that covid has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices.

It’s not yet clear whether that trend will fade as the pandemic is brought under control, Lazzara said, or if there will be a permanent shift to higher demand.

The biggest gain was in Phoenix, where home prices jumped 15.8%, followed by Seattle, with a 14.3% gain, and San Diego, at 14.2%.

Home sales have jumped in the past year, driven by a desire for more space among Americans fortunate enough to keep their jobs. With roughly one-quarter of workers doing their jobs from home, along with children going to school online, families have sought out houses rather than apartments or have moved to larger homes.

Yet that trend has run into a reluctance among many Americans to sell their homes — and have potential buyers parade through their living rooms — during the pandemic.

The number of available homes collapsed nearly onethird by February compared with a year earlier, to just over 1 million, according to the National Association of Realtors. That’s the sharpest yearly drop on records dating back to 1982.

Rising mortgage rates may slow sales a bit in the coming months, but borrowing costs remain near historic lows. The average rate on a 30-year fixed mortgage rose to nearly 3.2% last week, the highest since June, up from 3.1% the week before. That’s still below the pre-pandemic rate of 3.5%. The average rate on 15-year fixed-rate loans, popular among those seeking to refinance their mortgages, increased to 2.45% from 2.4% last week. It was 2.92% a year ago.

Record-low lending rates have prodded buyers into the housing market, which has been one of the strengths of the U.S. economy. But the shortage in the supply of homes remains a problem and has pushed prices higher.

Sales of new and existing homes fell sharply in February, mostly because of unseasonably cold winter weather and ice storms in Texas and other southern states. Yet existing home sales were still 9% higher in February compared with a year ago.