House prices jumped 19.2% per year in January, according to the latest S&P CoreLogic Case-Shiller indexes, a measure of U.S. home prices. This marks the largest annual increase on record in January and is a reversal from recent months which have seen annual home price growth slow.
This increase is up from the 18.9% annual increase in house prices seen in December. On a month-to-month basis, the house price index rose 1.1% from December to January alone, according to the report.
“Last fall, we observed that house prices, while continuing to rise quite strongly, had begun to slow,” said Craig Lazzara, chief executive of S&P DJI. “Even this modest deceleration was paused in January. The 19.2% year-over-year change for January was the fourth-largest reading in its 35-year history.”
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Many cities see house price growth accelerate in January
About 80% of metros saw house price growth pick up in January after slowing late last year, the report said. Some of the biggest gains were in Florida and Arizona.
“After four months of slowing or steady growth, house price growth accelerated in January and the S&P CoreLogic Case-Shiller Index posted a 19.2% year-over-year increase – the largest year-over-year increase in January in [the] the story of the series,” said CoreLogic Deputy Chief Economist Selma Hepp. “Eight out of 10 metros saw further acceleration in house price gains, particularly those in the West and Southeast.
Average home price growth in the top 10 cities rose 17.5% annually, up from last month’s 17.1% annual increase. In the top 20 cities, house prices rose 19.1% annually, compared to 18.6% in December.
Among major cities, Phoenix, Tampa and Miami recorded the highest annual increases in home prices, at 32.6%, 30.8% and 28.1%, respectively. This marks nearly three years (32 months) where Phoenix led the way in higher home prices, according to the report.
If you want to take advantage of rising house prices, you can consider cash refinancing to tap into the equity in your home. Visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.
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According to an expert, a further acceleration in property prices was expected
Although interest rates are rising — with a 30-year mortgage rate well above the 4% mark, according to latest data by Freddie Mac — house price growth has not slowed. But one expert said this reacceleration in the housing market was not surprising, as demand continued to put upward pressure on low inventories heading into the spring buying season.
“While the re-acceleration in house price increases may be concerning and likely disheartening for first-time buyers and younger buyers, it is nonetheless unsurprising given the disastrous inventory of homes for sale, which continues to decline and to continually record new lows,” Hepp said. “With mortgage rates hitting three-year highs, existing homeowners now have little incentive to sell and buy a new, more expensive home with a higher mortgage rate.
“And although the surge in interest rates is expected to have a dampening effect on demand, there are still many buyers in the market who are able to afford the rising costs of home ownership,” she said. “As a result, competition among buyers increased again this spring and two out of three homes sold above asking price – the same as last summer’s peak.”
Going forward, economists have predicted that house price appreciation may begin to slow again as the Fed keep pushing interest rates up in the coming year.
“The macroeconomic environment is changing rapidly,” Lazzara said. “The decline in COVID cases and the pick-up in general economic activity fueled inflation, and the Federal Reserve began to raise interest rates in response. We may soon begin to see the impact of the increase in mortgage rates on house prices.”
If you want to tap into the equity in your home before rates rise, you can consider refinancing with a cash-out mortgage now. Contact Credible to speak with a mortgage expert to see if this is the right option for you.
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