Price increases have exceeded 1% for the 5^th straight month, and have appreciated by more than 10% in the past year.

By Manuel Gutierrez, Consulting Economist to NKBA

Appreciation in the value of single-family homes moderated in December, but still registered a fairly robust 1.3% gain for the month.

According to the Case-Shiller house price index, monthly price increases have exceeded 1% for each of the last five months. They have been driven by a strong demand for housing, combined with an extremely low supply of homes available for purchase.

The sharp jump in home prices is clearly shown in Figure 1, with house-price inflation jumping by 1.3% last August and remaining high. This was significantly higher than July, when prices rose 0.6%.

Prior to the pandemic shutdown, house prices had moved very little. The monthly average  increase in the 12 months before March 2020, when state governments began to effectively shut down the economy, was 0.3%.

The accelerated price increases over the past few months have pushed current home prices more than 10% above those of a year earlier. Figure 2 displays the long-term house price appreciation back to 1990, with prices 10.4% higher last December than a year earlier.

In the six years prior to the post-pandemic demand surge for housing, house prices had increased at an annual pace of 4.9%, less than half the current pace.

House price appreciation is evident throughout all metro areas for which the Case-Shiller index is calculated. The annual increase for 19 of these metros, as of December, is shown in Figure 3. The dashed vertical line marks the 10.4% increase for the U.S. as whole.

Although the index is also calculated for the Detroit metro area, it is excluded from the chart because the December value for that market was not available.

Price appreciation in metro areas ranges from a low of 8% in Chicago, Dallas and Las Vegas, to a high of 14% in Phoenix.

Besides Phoenix, two additional metros tracking above the national average in appreciation are Seattle, with house price inflation of 13.6% (rounded to 14% in Figure 3), and San Diego, with prices 13% higher than a year earlier. Tampa is also running higher, at about 11%.

Corelogic, the company that collects the data used to calculate the Case-Shiller house price index, also provides prices for condominiums sold. Because there are very few condominium sales in many areas, even large metropolitan areas, the company releases the price index data for only five metros: Boston, San Francisco, New York, Los Angeles and Chicago.

Figure 4 displays the trend over the past two years for each of these five areas.

Condominium prices are rising significantly slower than the prices of single-family houses. While single-family home prices rose 10.4% in December over the prior year, prices for condos range from a high of 5% in Los Angeles to a decline of 1% for San Francisco.