US Home Price Increase Hits Record High Last Year... Up 18.8%

Low Interest Rates and Remote Work Fuel Real Estate Boom
Likely to Slow Down Due to Rate Hikes This Year

[Image source=AP Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] Last year, U.S. home prices recorded the highest annual increase ever due to low interest rates and supply shortages.

The Wall Street Journal (WSJ) reported on the 22nd (local time) that "the Standard & Poor's (S&P) CoreLogic Case-Shiller Home Price Index, which measures average home price trends in major U.S. cities, rose 18.8% compared to the previous year." This is the highest level in 34 years since related statistics began in 1987.

By region, Phoenix, Arizona led with a 32.5% increase, marking the highest nationwide rise for 31 consecutive months. Tampa, Florida ranked second with a 29.4% increase.

The home price index for 10 major cities rose 17%, and for 20 major cities, it rose 18.6%. The 20-city index exceeded the expert forecast compiled by WSJ (8.1%).

In the U.S., a real estate boom has occurred since the COVID-19 pandemic due to low mortgage rates and the impact of remote work. Home sales surged to the highest level in 15 years last year.

However, supply shortages further drove up price increases. The National Association of Realtors stated, "The housing shortage continues this year, and the number of new homes for sale in January fell to a record low."

Especially, first-time homebuyers are facing difficulties. Last month, the share of first-time buyers in the overall market was 27%, down 6 percentage points from 33% in the same period last year.

This year, however, home price increases are expected to slow down as mortgage rates may continue to rise due to the Federal Reserve's rate hikes.

The U.S. government-sponsored mortgage company Freddie Mac reported, "The average rate for a 30-year fixed-rate mortgage is currently 3.92%, the highest level since May 2019."

Selma Hepp, chief economist at real estate data analytics firm CoreLogic, said, "The sharp rise in mortgage rates is likely to reduce demand, especially among first-time buyers and those with limited budgets."

This content was produced with the assistance of AI translation services.