Home prices skyrocketed in 2021 at the fastest rate in 34 years.
The S&P CoreLogic Case-Shiller Index posted an 18.8 percent annual gain in December, same as the previous month. The 10-City composite, made up of the 10 largest metros, saw a 17 percent annual increase and the 20-City composite posted a year-over-year gain of 18.6 percent.
Craig Lazzara, Managing Director at S&P DJI, said in the report the annual increase was “substantially ahead of 2020’s 10.4% gain.” The figures also marked a record for the 20-City composite and the second-best year ever for the 10-City composite.
Phoenix led the top cities — for the 31st consecutive month — with a 32.5 percent year-over-year price gain. Two of Florida’s major cities followed closely behind, with Tampa at 29.4 percent growth and Miami at 27.3 percent.
“We continue to see very strong growth at the city level,” Lazzara said. “All 20 cities saw price increases in 2021, and prices in all 20 are at their all-time highs.”
The South led U.S. regions with 25.7 percent yearly growth, followed by 25.6 percent increase recorded in the Southeast. However, Lazzara said all regions had significant gains.
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Prices have soared since the onset of the pandemic, with some markets spurred by the migration of renters and buyers in search of nicer backdrops for their remote work setups.
Transplants were looking to take advantage of areas with lower costs of living, but the surge in business tightened some markets out of reach. U.S. RealtyHop’s February affordability index illustrated how steep home prices have far outpaced wage increases in some areas like Miami, which the report ticked as the least affordable housing market in the country.
The key driver and the sustainability of the record activity remains unclear, Lazzara said. Despite soaring home prices and sales notched in recent months, the market is likely headed for a snag as inventory hit record lows and mortgage rates embarked on a steady climb.
“More data will be required to understand whether this demand surge simply represents an acceleration of purchases that would have occurred over the next several years rather than a more permanent secular change,” Lazzara said. “In the short term, meanwhile, we should soon begin to see the impact of increasing mortgage rates on home prices.”