Home Prices Rose Nearly 19% in 2021 Marking Largest Increase in 34 Years

Data from the S&P CoreLogic Case-Shiller U.S. National Home Price Index shows home prices increased by about 19% in 2021. The 18.8% increase is the biggest since the record has been kept. The Washington Examiner reports, Phoenix, Tampa, and Miami saw the largest price jumps, with 32.5%, 29.4%, and 27.3%, respectively. The growing cost of living, along with rising mortgage rates, has made homeownership less affordable.

The Federal Reserve’s decision to keep interest rates near zero and a surge in demand fueled in part by substantial federal spending has led to an extremely hot housing market. Craig Lazzara, the managing director and global head of index investment strategy at S&P DJI stated, “December’s price increase ranked in the top quintile of historical experience for 19 cities and in the top decile for 16 of them.”

Faced with continued inflation, the central bank is considering multiple rate increases this year, including a half-percent jump next month, which would be the first major move by the Fed in more than two decades. 

In anticipation of the central bank’s response, mortgage rates are rising and people are attempting to lock in mortgages now before interest rates are raised, which is one of the main reasons for the growing demand for homes. However, Gay Cororaton, the National Association of Realtors’ housing and commercial research director explained that demand for homes will likely fall after the rate hikes. 

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