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

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).

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:

→ 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 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.