October home prices up 18.4% from 20

WASHINGTON – Home prices in the United States rose again in October as the housing market continues to grow following last year’s coronavirus recession.

The S&P CoreLogic Case-Shiller Home Price Index in 20 cities, released on Tuesday, was up 18.4% in October from a year earlier. The gain marked a slight deceleration from a 19.1% year-on-year increase in September, but was roughly in line with what economists expected.

All 20 cities posted double-digit annual gains. The hottest markets were Phoenix (up 32.3%), Tampa (28.1%) and Miami (25.7%). Minneapolis and Chicago posted the smallest increases, 11.5% each.

The housing market has been strong thanks to the lowest mortgage rates, a limited supply of housing in the market and pent-up demand from consumers stranded by the pandemic last year. Many Americans, tired of being locked in their homes during the pandemic, are looking to move from apartments to houses or larger homes.

“Home price growth will slow further over the coming year, but will continue to rise,” said Danielle Hale, chief economist at Realtor.com. Many will take advantage of the continued flexibility of the workplace to relocate to the suburbs where, despite increases in house prices, many may still find a price per square foot lower than in neighboring towns. “

It is still unclear whether this change is permanent or an aberration, said Craig Lazzara, managing director of S&P Dow Jones Indices.

“We previously suggested that the strength of the US real estate market was due in part to a shift in location preferences as households react to the covid pandemic,” Lazzara said. “More data will be needed to understand whether this increase in demand represents an acceleration in purchasing that would have occurred in the next few years, or reflects a more permanent secular change.”

The National Association of Realtors reported last week that sales of previously occupied homes rose for the third consecutive month in November at a seasonally adjusted annual rate of 6.46 million.

Last week, mortgage rates fell to 3.05% for the 30-year fixed-rate benchmark home loan and to 2.66% for the 15-year fixed-rate benchmark mortgage. Still low rates indicate that credit markets seem more concerned with the omicron variant that depresses economic growth than with the highest inflation rates in nearly 40 years.

A secondary impact of rising house prices is that it means that the limits on compliant mortgages and FHA loans will also be higher. Borrowers can therefore avoid needing a jumbo loan to purchase a property.

Loan limits for conforming loans acquired by Fannie Mae and Freddie Mac, which are reset annually, will increase in 2022. FHA loan limits, which have yet to be announced, will also likely increase due to the price increase. VA loans can be approved for any amount for qualified borrowers as loan limits have been removed for this program effective January 1, 2020.

In most housing markets, the new compliant loan limit will be $ 647,200 in 2022, an increase of $ 98,950 from the limit of $ 548,250 in 2021. Borrowers who need to finance an amount more important to buying a home will need to apply for a jumbo loan, which often has stricter guidelines for borrowers, larger down payment requirements, and sometimes higher interest rates due to the risk associated with a larger loan.

Information for this article was provided by Michele Lerner of the Washington Post.

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