Home Prices Rise at the Fastest Rate on Record

The Case-Shiller national home price index logged a 19.2% year-over-year gain from January 2021 to January 2022, but according to Realtor.com, a steep rise in mortgage rates could put a damper on fast rising home prices following the spring buying season. After nearly two years of relentless gains, home-price growth gradually decelerated in the fall of 2021, but constrained inventory and uninhibited demand led to sharp price increases at the start of 2022.

Sun Belt cities like Phoenix, Tampa, and Miami reported the most significant price hikes, followed by markets in the Mountain region in states like Montana, Idaho, Wyoming, Colorado, and Nevada, among others. Though many economists expect inflated mortgage rates to cool off escalated home prices eventually, no immediate changes have been reported as a limited supply keeps competition tight.

“Eventually mortgage rates will slow down home prices, but it hasn’t happened so far,” said Ken Johnson, an economist at Florida Atlantic University. “We should not see rapid upticks in prices as mortgage rates rise. It’s that kind of exuberance that led to past housing downturns.”

“While the small number of homes-for-sale will keep upward pressure on prices as we move through the Spring buying season, I expect conditions to undergo noticeable adjustments in the months ahead,” said George Ratiu, manager of economic research at Realtor.com.

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