Home prices are showing no signs of slowing down -- at least according to new indices released this week. Both the S&P CoreLogic Case-Shiller Home Price Indices and the Federal Housing Finance Agency (FHFA) House Price Index show home prices have jumped over 10% since the end of 2019. According to the FHFA, it's the largest annual gain in the history of the agency's index.
"Persistent buyer demand amid severely undersupplied housing market has undeniably pushed home prices to new highs in 2020," said Selma Hepp, deputy chief economist for CoreLogic (NYSE: CLGX). "Continual decline in mortgage rates to new record lows -- particularly in December -- has also helped expand the affordability box for some buyers and allowed them to bid up prices higher than they would have been able to if rates were higher, also further accelerating price growth."
Ultimately, the price bump has a two-pronged impact for investors: Those with existing properties likely saw a massive bump in equity and could see serious returns from selling. Those on the market for a new property? Well, they'll face sky-high prices and likely bidding wars.
Are you busy planning your next investing move? Here's what you need to know about home prices -- as well as where they're rising most.
As if a 10% national increase weren't enough, if you dig down into the state- and market-level data, many markets rose even more.
According to the FHFA, home prices rose in all 50 states plus the District of Columbia. The biggest increases were seen in:
- Idaho (+21.1%)
- Montana (+15.5%)
- Utah (+15.4%)
- Arizona (+14.1%)
- Connecticut (14.1%)
No states saw prices drop, but the smallest gains occurred in Washington, D.C., Louisiana, Hawaii, North Dakota, and Illinois.
At the metro level, these markets saw the largest bump in prices:
- Phoenix (+14.4%)
- Seattle (+13.6%)
- San Diego (+13%)
- Cleveland (+11.5%)
- Boston (+11.4%)
According to the S&P Index, it was the 19th straight month Phoenix took the cake.
Will prices keep rising?
There's no predicting the future, but according to both the FHFA and CoreLogic analysts, the conditions remain prime for more price jumps.
"In the face of many economic challenges arising from the pandemic, house prices remain a bright spot," said Lynn Fisher, deputy director at the FHFA. "A continuation of low interest rates and shortages in the stock of homes available for sale should maintain upward pressure on home prices in the near-term."
As we've seen in recent weeks, though, rates aren't as low as they once were. Rates have increased on 30-year, fixed-rate loans for at least the last three weeks.
If they keep rising, or, as Fisher says, "vaccinations begin to change buyer and seller behaviors," price appreciation could moderate.
The bottom line
With prices on the rise, your existing properties are gaining value. If you're on the hunt for a new investment, though? Expect a seller's market, complete with rising prices, bidding wars, and stiff competition. Use these tips if you find yourself up against other buyers.