E Economics

U.S. Housing Prices Index Increased At The Fastest Pace Since June 2014

29 December, 2020


In October, a measure of U.S. housing prices in 20 cities increased at the fastest pace since June 2014 as both mortgage rates and housing inventory reached a record low. As I expected, on a YoY basis, the S&P CoreLogic Case-Shiller index (20-City Composite) grew more than expected, rising 7.95 percent in October (up from +6.64 percent in September).


housing prices - S&P Corelogic Case-Shiller (20-City Composite) YoY


This trend has been confirmed by other indexes. As a matter of fact, the CoreLogic House Price Index for October jumped by 7.34 percent YoY (the most since April 2014 and up from 6.49 percent YoY in September). In addition, the FHFA (Federal Housing Finance Agency) purchase-only price index rose 10.2 percent YoY in October (the largest increase since November 2005 and up from +9.1 percent in September).


housing prices2 - FHFA Price Index YoY


According to my proxies, housing prices will keep strenghtening in the coming months amid strong fundamentals:

→ Buyers keep on benefiting from favorable market conditions with mortgage rates reaching the lowest level on record in December
→ Demand for second homes has been strong amid pandemic
→ Housing supply remains limited, hitting a record low in November


Focusing on monetary policy, investors will keep an eye on real estate given that a constant spike of housing prices (by more than 10% YoY) could push policymakers to rethink Fed strategy sooner than expected.