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Case-Shiller: Phoenix Home Prices Hot, Hotter, and Hottest

Sammamish Mortgage
Published:
March 29, 2012
Last updated:
April 1, 2021
Case Schiller Index Update
In This Article

The S&P Case-Shiller National Home Price Index posted its highest gain in nearly 15 years with a year-over-year home price growth rate of 11.20 percent in January.

The December 2020  National Home Price Index reported 10.40 percent home price growth. The S&P Case-Shiller 20-City Home Price Index reported 11.10 percent year-over-year growth with 19 of 20 cities reporting higher home prices.

Cleveland, Ohio was the only city reporting no home price growth in January. Detroit, Michigan reported home price growth data for the first time in nearly a year.

Phoenix, Seattle, and San Diego Home Prices are Hot, Hotter, and Hottest

Home prices in Phoenix, Arizona again topped Case-Shiller’s 20-City Home Price Index for January with a year-over-year home price growth rate of 15.80 percent. Seattle, Washington held its second-place position with home price growth of 14.30 percent, and San Diego, California held third position with year-over-year home price growth of 14.20 percent.

Rapidly rising home prices coupled with rising mortgage rates presented challenges for first-time and moderate-income buyers; some have revised their purchasing budgets downward while others have left the market. Analysts noted that buyers leaving the housing market could impact high demand and strong buyer competition which has fueled bidding wars and driven home prices ever higher in popular metro areas.

Craig Lazzara, managing director and head of index investment strategy at S&P Dow Jones Indices, said that January’s home price data supported the position that COVID encouraged buyers to leave congested urban areas for single-family homes in suburbia. He said that many of these households may have accelerated existing home-buying plans.

FHFA Posts 12 Percent Increase in Home Prices; Slowing Momentum

The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, reported a 12 percent year-over-year growth in prices of single-family homes owned or financed by the two government-sponsored mortgage companies. According to Lynn Fisher, FHFA’s deputy director of the division of research and statistics, home price growth slowed to its slowest pace since June. She wrote, “While house prices experienced historic growth rates in 2020 and into the New Year, the monthly gains appear to be moderating.”

Home prices are expected to continue growing in popular metro areas, but at a slower pace due to higher mortgage rates and would-be buyers leaving the market. Demand for homes may ease as COVID-driven flight from urban areas slows but families working from home and homeschooling their children also create demand for larger homes.

Low Mortgage Rates

Today, mortgage rates are near historic lows, with rates having actually dipped to their lowest-ever level several times in the last few months.

With mortgage interest rates as low as they are now (3.17% for a 30-year fixed mortgage as of the time of this writing on March 31, 2021), competition for housing is high. This is even more true because of the current tight inventory situation. Inventory is short all across the country and is especially tight in certain parts, including the Northwest.

Bidding wars are on the rise once again, which will have a direct impact on price increases throughout the remainder of 2021.

Right now, the average home price in the US is $272,446. According to Zillow, that’s a 9.9% increase from the same time last year. According to Zillow, the housing market across the country is still “very hot” right now.

Mortgage rates have dipped over the past few months and are expected to remain extremely low, which may help boost sales over the coming months. Experts anticipate the 30-year fixed-rate mortgage rate to remain around 3% throughout the remainder of the year.

A Word About Case-Shiller Index Flaws

It should be noted, however, that the Case-Shiller Index has some shortcomings. For instance, the index is based on changes in home prices of a single home through successive sales. This means that to calculate its home price index, the Case-Shiller searches for sales of the same home over a period of time and calculates the difference in contract price.

This methodology can distort the home price tracker downward during times of weak economy because there is no distinction made for homes sold in foreclosure or as a short sale.

Another distortion in the Case-Shiller Index is that the model neglects all home types that are not of type “single-family residence.” This means that multi-unit homes and condominiums are excluded from the Case-Shiller Index model.

In some markets, such as Chicago and New York City, condominiums account for a large percentage of overall sales.

Lastly, the Case-Shiller Index is published with a “lag,” which renders it useless to buyers and sellers of Bellevue in search of real-time, relevant data. The most recent Case-Shiller Index is published with a 60-day delay, so a report issued in February only covers home sales through December, for instance.

In 2019, job growth has averaged 165,000 per month. Data that’s two months old does little to help us today.

Making sound real estate decisions is about having timely, relevant data at-hand when it’s needed. The Case-Shiller Index fails in that respect. It’s good for highlighting the U.S. housing market on the whole, as it existed in the past. For real-time market data, though, you’ll want to talk with an active real estate agent.

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Do you have questions about mortgages that you want answered? Sammamish Mortgage can help. We are a local, family-owned company based in Bellevue, Washington. We serve the entire Pacific Northwest region, including Washington, Oregon, Colorado, and Idaho. We offer a wide variety of mortgage programs and products with flexible qualification criteria.  Please contact us if you have mortgage-related questions.

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