House Prices Rose 19% Last Year In The US

The moves amid the pandemic had to do with the escalation, which many are now wondering if it will cool down or continue for another year.

Many people felt (or suffered) the rapid rise in house prices last year in the United States. It was so steep that it added almost 19% in 2021, the most in 34 years, according to an index from the consulting firm S&P revealed on Tuesday.

There were cities where prices skyrocketed even higher. Phoenix tops the list with a 32.5% rise. It was followed by Tampa, with a 29.4% rebound, and Miami, with another 27.3%, according to the S&P CoreLogic Case-Shiller Indices, seen as a barometer of home prices in the country.

Prices rose across the United States, but in the South and Southeast they rose more sharply. An unprecedented cocktail of factors fueled the escalation, especially the covid-19 pandemic and how its impact prompted many to look for another place to live.

House prices skyrocketed in these cities

We previously suggested that the strength of the US housing market is fueled in part by a shift in home location preferences in reaction to the COVID-19 pandemic,” said Craig Lazzara, director of S&P DJI. Although he clarified that the figures must be followed to determine if the rebound in home purchases will be sustained over time.

“In the short term, however, we should soon start to see the impact of rising mortgage rates on house prices,” he said.

From having fallen to historically low levels during part of the health crisis, mortgage rates have risen steadily since December. The fixed rate on a 30-year mortgage, for example, stood at 3.92% in the week ending February 17, according to data from mortgage lender Freddie Mac.

That's up more than 1 percentage point when compared to 2.81% at the same time last year. A mortgage rate approaching 4% also means it's at a level not seen since May 2019.

Given the expected uptick in mortgage rates, we anticipate some moderation in home demand and price growth to slow to 6.2% in 2022 and cool further to 2.5% in 2023. Mac in a report published in late January.

Will house prices cool down?

While it would be a much smaller uptick, in the single digits, it would still mean buyers would pay more than they did last year for a new home. Data from the National Association of Realtors showed that in the southern United States, a home* cost an average of $323,000 last December, well up from $268,800 in December 2020. In the western United States, the average price of a house already exceeds half a million dollars.

“As home rates and prices rise, affordability has become a major hurdle for potential buyers, especially when inflation threatens to strain consumers' budgets,” said Sam Khater, chief economist at Freddie Mac. .

In fact, inflation is currently the biggest headache for ordinary citizens and the US Federal Reserve, which is preparing a string of hikes in its key interest rate after consumer prices rose the last year at its fastest rate in nearly four decades.

Despite this scenario that tightens the pockets of consumers, the demand for houses is not entirely clear that it will drop sharply in the coming months. Some would choose to buy their home before mortgage interest rates go higher, while others would prefer to wait for them to rise to see if it cools the market a bit.

The numbers indicate that housing unit inventories remain low, and furthermore, there are markets like Miami where real estate brokers and project developers continue to watch buyers pay cash for a home, that is, they don't need a bank to lend money to buy it.

“I don't have the supply for the demand that we have in Miami. I think the demand will remain (at this level) for years to come,” Sergio Pino, president of Century Homebuilers Group, told the local newspaper The Miami Herald. Pino, for example, cited a project in which twenty New York buyers paid cash for properties in a new community that his company developed in Miami.

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