The numbers: The cost of buying a home surged again in October, a closely followed index showed, and prices rose at the fastest rate in six years in a clear sign the housing market is still booming despite a raging pandemic.
A measure of home prices in 20 large cities rose at a 7.9% yearly pace in October, according to the S&P CoreLogic Case-Shiller price index. That’s up from 6.6% in the prior month.
A broader measure by Case-Shiller that covers the entire country, meanwhile, showed a similarly large 8.4% increase in home prices over the past year. That’s also up sharply from 7% in the prior month.
Prices have risen at the fastest clip since 2014 owing to record-low mortgage rates and an influx of people leaving cities to escape the coronavirus and find more space. A short supply of homes for sale has also been a contributing factor.
On a monthly basis, the Case-Shiller 20-city index rose 1.3% in October.
What happened: Prices rose in at least 19 of the 20 large cities tracked by Case-Shiller. Detroit was excluded once again because not enough information could be collected. A state lockdown to try to slow the spread of the virus has led to delays in record keeping.
The biggest yearly increases in home prices took place in Phoenix (12.7%), Seattle (11.7%) and San Diego (11.6%).
The smallest increases occurred in New York (6%) and Chicago (6.3%) and Las Vegas (6.4%) — cities that have been hit hard from the virus or whose local economies have suffered the most.
Big picture: Home sales aren’t expected to slow much, if at all, even amid a record coronavirus outbreak. Super-low rates and the growing prospects of the economy gradually returning to normal are likely to keep demand high.
That’s good news for sellers but bad news for prospective home buyers, who are unlikely to get much of a price break in 2021.
What they are saying? “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,” said Craig J. Lazzara, global head of index investment strategy at S&P Dow Jones Indices.
Market reaction: The Dow Jones Industrial Average and S&P 500 rose in Tuesday trades. Stocks have climbed to a record high on optimism that coronavirus vaccines will soon lead to a stronger economic rebound.