But Interest-Rate-Adjusted House Prices Are Low

• October 2020 data is the latest available from Case-Shiller as I write this on December 29, 2020.

• The data is a 3-month moving average so what they call October is really the August-October average.

House prices in Phoenix have been appreciating faster than in any of the other metro areas covered by Case-Shiller, since October 2019. Real, inflation-adjusted house prices increased 11% over the previous 12 months in Phoenix.

For the U.S. as a whole, real, inflation-adjusted house prices were up 7% from October 2019 to October 2020.

Tell me in the “Comments” what you think.

House Price Momentum

House prices continued to gain upward momentum in October. Nominal house prices increased more over the last 12 months compared to the previous 12 months in all cities covered by Case-Shiller.

For the U.S. as a whole, nominal house prices were up 8% from October 2019 to October 2020 but they only increased 3% from October 2018 to October 2019 so U.S. house prices have been gaining a lot of upward price momentum.

Home Prices

The Case-Shiller Home Price Index is now showing the rapid price rises we’ve been seeing in other more timely datasets.

Price Appreciation

Phoenix had 13% 12-month house (nominal) price appreciation!

Seattle and San Diego tied for #2 with 12% annual appreciation.

Four of the Case-Shiller cities tied for last place. New York, Chicago, Dallas and Las Vegas all tied for least annual appreciation but it was still very good at 6%.

Mortgage Rates Fell 2.2 Percentage Points Since November 2018

House prices have a ton of upward momentum behind them after 2 years of, more or less, constantly falling mortgage interest rates.

You can see from the interactive graph below that the 30-year fixed rate mortgage rate hit 4.9% in November 2018. Now, it’s 2.7%. That’s the main reason the real estate market has gone crazy despite a recession and a pandemic.

Per dollar borrowed, your monthly principal and interest payment is now 23% less than in November 2018 so you can pay a LOT more for a house and people are.

It reminds me of the 3 percentage point decline in mortgage rates from mid-2000 to mid-2003 which was a big part of the real estate mania in 2004 and 2005. Hopefully, 2021 won’t be 2004 or 2005.

Is there any product more sensitive to interest rates than houses?
Let me know in the comments.

To see more about the wild Phoenix housing market, check out my other website, Arizona Real Estate Notebook.

Note. You can find interactive versions of these charts for all 20 Case-Shiller metros here.

Note. This post was written on December 29, 2020 but the interactive graphs will be continually updated.

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