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Home prices are still rising during the pandemic owing to historically low interest rates and more people leaving big cities.
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The numbers: The cost of buying a house rose sharply again in September and by one measure hit a six-year high, a Case-Shiller index showed, signaling that prospective buyers are unlikely to find better deals any time soon.
A measure of home prices in 20 large cities rose at a 6.6% yearly pace in October, according to the S&P CoreLogic Case-Shiller price index. That’s up from 5.3% in the prior month.
Wall Street economists had forecast a 5.4% increase.
A broader measure by Case-Shiller that covers the entire country showed a similarly large 7% increase in home prices over the past year, marking the fastest 12-month gain since 2014.
Home prices have actually risen faster during the worst pandemic in a century instead of getting cheaper. Rock-bottom mortgage interest rates and a flush of people leaving the cities to flee the pandemic has boosted demand at a time when the supply of home for sales is near a historic low.
On a monthly basis, the Case-Shiller 20-city index rose 1.2% in September.
Read: Raging pandemic singes economy. Darker days ahead?
What happened: Prices rose in 19 of the 20 large cities tracked by Case-Shiller. The lone exception, Detroit, likely registered higher prices as well, but Case-Shiller could not collect enough data because of rising Covid-19 cases in the area.
The biggest increases took place in Phoenix, Seattle and San Diego. The smallest were in New York and Dallas. New York has seen a particularly large outflow of residents after suffering a huge number of Covid-19 cases early in the pandemic. Dallas was another hard-hit area.
Read: U.S. businesses grow faster in November despite coronavirus spike
Big picture: Home sales might slow a bit in the face of a record surge in coronavirus cases and a softer economy. Yet don’t expect demand — or prices — to taper off all that much, especially if a slew of pending vaccines turn out to be effective. Sales are at the highest level in years and likely to stay that way if the economic rebound picks up the pace.
Market reaction: The Dow Jones Industrial Average DJIA, +1.22% and S&P 500 SPX, +0.88% rose in Tuesday trades.
