Key Highlights
- Smaller Midwestern metro markets seeing strong price gains
- Prices in midsection metros at least +10% higher than a year ago
- Nationally, home prices up +8.4% in October, up from +7% gain in September, according to S&P Case Shiller Index
- Price increases driven by Midwestern markets
Home values of residential properties nationwide have gone through the roof. Just during the month of September, home prices rose +7%, according to the S&P CoreLogic Case Shiller Index, the largest one-month price gain in over a decade. On top of this +7% gain in September, home prices increased a whopping +8.4% nationwide in October.
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And guess what? Large coastal cities are not leading this home price escalation…smaller metro market such as Cincinnati, Cleveland Indianapolis, Kansas City, Boise, Austin and Memphis are at the top of the leader board and seeing home prices increase at least +10% when compared with one year ago, according to the Federal Housing Finance Agency (FHFA).
Most all of these smaller metro markets have historically been seen as more affordable and as having greater inventory of for-sale homes.
So what’s driving these price surges? According to Craig Lazzara, managing director with S&P Dow Jones Indices (partner with CoreLogic Case Shiller in producing monthly S&P CoreLogic Case Shiller Index), “Although the full history of the pandemic’s impact on housing prices is yet to be written, the data from the last several months are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes.”
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With these traditionally more affordable smaller metro markets becoming less affordable, ATTOM Data Solutions in its latest monthly affordability report tells us that the median home price in 55% of the nation’s countiesis now considered to be unaffordable to the country’s average wage earners. This is a 10% increase in lack of affordability compared to last year, pre-pandemic.
Peter Boockvaar, managing director with the Bleakley Advisory Group, said, “These price gains are completely offsetting the benefit of lower mortgage rates and it takes even more to come up with a down payment which is a big deal for that first-time buyer, less so for others.”
Obviously, 2020’s more than 12 record-low mortgage interest rates that were intended to give homebuyers more purchasing power have become less impactful as prices have continued to rise.
Matthew Speakman, an economist with Zillow, remains optimistic, however. Speakman said, “These factor appear likely to remain in place in the near term, and an incrementally improving economy should encourage more buyers to enter the market. Taken together, this torrid pace of home price appreciation appears primed to continue well into 2021.”
Thanks to CNBC.
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