E Economics

US Housing Prices Index Rose At The Fastest Pace Since May 2014

26 January, 2021




 

In November, a measure of US housing prices in 20 cities rose at the fastest pace since May 2014 supported by record low mortgage rates and inventory. As I previewed, on a YoY basis, the S&P CoreLogic Case-Shiller index (20-City Composite) increased more than expected, rising 9.08 percent in November (up from 8.01 percent in October).

 

US Housing prices

 

This trend has been confirmed by other indexes. As a matter of fact, the CoreLogic House Price Index for November grew by 8.17% YoY (up from 7.25% YoY in October). It was the fastest increase since March 2014. In addition, the FHFA (Federal Housing Finance Agency) purchase-only price index rose 11.0 percent YoY in November (the largest increase on record and up from +10.3 percent in October).

 

 

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

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

 

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) will probably take place as soon as H1 2021 and could push policymakers to think about tapering MBS purchases sooner than expected.