If you’re looking to buy a home in the current housing market, it helps to find a ray of sunshine wherever you can. So here is that ray of sunshine: Yes, home prices continue to surge — they rose nearly 19% in November — but the pace of price growth has been decelerating.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index — a measure of average home prices in the United States — showed an 18.8% year-over-year gain in November, according to a Jan. 25 press release from S&P Dow Jones Indices. That was down from a 19% increase the previous month and continued a string of slightly slower growth.
“For the past several months, home prices have been rising at a very high, but decelerating, rate. That trend continued in November 2021,” Craig J. Lazzara, managing director at S&P Dow Jones Indices, said in the press release.
The 10-city composite rose 16.8% in November, down from a 17.2% increase the previous month. The 20-city composite climbed 18.3% in November vs. 18.5% in October. Of course, “deceleration” is a relative term, considering that home prices rose at record rates for much of 2021.
“Despite this deceleration, it’s important to remember that November’s 18.8% gain was the sixth-highest reading in the 34 years covered by our data (the top five were the months immediately preceding November),” Lazzara added.
Phoenix, Tampa and Miami logged the highest year-over-year gains of the 20 cities in November, and they put up some truly staggering numbers. Phoenix led with a 32.2% year-over-year price increase, followed by Tampa with a 29% gain and Miami with a 26.6% increase. Eleven of the 20 cities reported higher price increases in the year ending November 2021 vs. the year ending October 2021.
The smallest increases were reported in Boston, Minneapolis, Chicago and Washington, D.C., but each one of those cities still saw home prices rise in double digits year over year.
November marked the 12th straight month of double-digit gains in overall home prices, said Bill Dallas, president of Finance of America Mortgage. Much of the reason goes back to plain old economics: The supply of homes simply can’t keep up with demand.
“Lasting effects from the pandemic — including supply chain disruptions, a lack of workers and rising material costs — mean new housing supply has been far weaker than anticipated,” Dallas said in an email to GOBankingRates. “In my opinion, increasing home prices will continue to be the norm as long as supply is restricted, though that shouldn’t deter homebuyers in the market for a house right now.”
There are some positive signs for buyers, he said. One is that rising mortgage rates might cause some homeowners to put their homes on the market, which would increase the supply. Current rates are about 75 basis points above year-ago levels, CNBC reported.
In addition, real estate investors who have gobbled up homes in recent years might finally decide to start selling rather than buying, at least in select markets.
“I anticipate investors will begin to stay clear of real estate now, which would reduce competition among homebuyers,” Dallas said. “Some investors may also begin to sell properties they acquired over the past few years to take advantage of price gains, which would increase inventory and potentially help prospective homebuyers in some markets.”
More From GOBankingRates