Home prices continue historic rise, setting another new record

Zach Wichter

Housing prices have continued to surge during the pandemic at a rapid pace, with one index showing a record jump in recent months.

The Federal Housing Finance Agency’s quarterly housing price index rose 3.8 percent in the fourth quarter of 2020 over Q3, the largest gain since that data has been collected starting in 1991, according to Lynn Fisher, deputy director of FHFA’s division of research and statistics. The index also showed a 10.8 percent increase in prices over the fourth quarter of 2019.

Meanwhile, the monthly S&P Corelogic Case-Shiller Index analysis showed a 10.4 percent gain in average home prices in all nine U.S. census divisions in December, compared with a 9.5 percent rise in November.

Since the start of the pandemic, real estate has remained a rare bright spot in an otherwise dark economic picture.

Lockdowns and the working from home trend coupled with historically low mortgage interest rates prompted many people to move, especially out of cities and into suburbs in search of more space. But, rebounding mortgage rates are just beginning to squeeze housing affordability.

“Higher mortgage rates mean the red-hot housing market might downshift to merely sizzling. The lack of homes available for sale is a much bigger impediment than a quarter percentage point rise from record lows in mortgage rates,” said Greg McBride, Bankrate’s chief financial analyst.

Even so, the FHFA predicts that a continuation of this trend could affect home prices.

“If rates gradually rise later in the year, or if vaccinations begin to change buyer and seller behaviors, the pace of price appreciation could moderate.” Fisher said in a video released by FHFA.

It’s likely that mortgage rates will continue this upward trajectory in the coming months, though they’ll still remain low compared to historical trends. Even so, with housing stock expected to remain limited, home prices should stay relatively high.