For many economic data series, 2020 has been a roller coaster. Not for housing, however. The onset of the COVID-19 pandemic and social distancing measures jump-started the “nesting” behavioral shift away from urban apartments and into single-family housing in the suburbs, as households sought additional space.
As shown in the LPL Chart of the Day, the S&P CoreLogic Case-Shiller 20-City Composite rose 7.95% year over year (Y/Y) in October, marking the strongest y/y gain since 2014. A similar metric, surveyed by the Federal Housing Finance Agency, confirms the strong rise in home prices.
Nearly all of the 20 cities reported increases in home prices (although data from Detroit is delayed due to the pandemic), indicating prices are rising across the nation. The behavioral shift has also benefited from cyclical tailwinds like low inventories, historically low mortgage rates, and demographic forces, which have emboldened sellers to raise asking prices.
“It’s been remarkable to see that even during the height of the economic downturn, housing data has remained robust,” noted LPL Chief Market Strategist Ryan Detrick. “While the equity market has been more volatile, this data has underpinned the strength we’ve seen from homebuilders and materials stocks.”
While we don’t expect any near-term reversals of the health of the housing market, it wouldn’t be surprising for momentum to fade as the underlying data continues to set a high watermark for additional gains. Further, as the rollout of the approved COVID-19 vaccines continues, this may also begin to ease some of the behavioral pressure that has lifted demand for single-family housing.
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