November home prices rose 9.5%, one of the highest gains on record, Case-Shiller says

The surge in home prices is not slowing down, thanks to high buyer demand and a record low supply of homes for sale.

Prices nationally rose 9.5% in November, compared with November 2019, according to the S&P CoreLogic Case-Shiller Home Price Indices. That is the strongest annual growth rate in over six years, and a significantly stronger gain than in October, when prices were up 8.4%. It also ranks as one of the largest annual gains in the more than 30-year history of the index.

The 10-city composite annual increase in prices was 8.8%, up from 7.6% in October. The 20-city composite showed a 9.1% year-over-year gain, up from 8.0% in the previous month. Detroit was excluded, however, because of continued data reporting issues due to the pandemic.

“Recent data are 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. “This may represent a true secular shift in housing demand, or may simply represent an acceleration of moves that would have taken place over the next several years anyway. Future data will be required to address that question.”

Phoenix, Seattle and San Diego continued to show the strongest price appreciation of all the major markets in November. Phoenix led the way with a 13.8% year-over-year price increase, followed by Seattle with a 12.7% increase and San Diego with a 12.3% rise. All 19 cities reported higher price increases in the year ending November versus the end of October.

Prices were fueled not just by supply and demand, but by record-low mortgage rates. The average rate on the popular 30-year fixed mortgage, which started November already low, fell further throughout the month, hitting a low of 2.79% by Dec. 1, according to Mortgage News Daily.

Home prices usually lag sales trends, and home sales have been slightly weaker over the last few months. The normal historical trends, however, may not apply because sales are slower mostly due to weak supply and not weak demand. It remains to be seen how much higher prices are deterring buyers, as sales of newly built homes remain strong, and they sell at a price premium to existing homes.

Builders have been ramping up production recently, which could throw a bit of cold water on these very hot prices.

“Our 2021 outlook expects an eventual moderation to price gains as home construction ramps up and the widespread availability of COVID vaccines bring more flexible sellers back to the housing market, but it will be some time before these changes bring relief,” said Danielle Hale, chief economist with realtor.com.