The numbers: The cost of buying a home rose again in October, an index followed, and prices rose at the fastest rate in six years. This is a clear sign that the housing market is still booming despite a raging pandemic.
A benchmark of house prices in 20 major cities rose 7.9% in October, according to the S&P CoreLogic Case-Shiller Price Index. This is higher than 6.6% in the previous month.
A broader case-by-country measure of Case-Shiller, meanwhile, has shown a similar 8.4% increase in house prices over the past year. It is also sharply higher than 7% in the previous month.
Prices have risen at the fastest rate since 2014 due to record low mortgage rates and an influx of people leaving cities to escape the coronavirus and find more space. A shortage of homes for sale was also a contributing factor.
On a monthly basis, the Case-Shiller 20-city index rose 1.3% in October.
Read: New federal coronavirus cash should keep economy going until vaccines are widespread
What happened: Prices have risen in at least 19 of the 20 major cities tracked by Case-Shiller. Detroit was once again excluded because not enough information could be gathered. A shutdown by the state to try to slow down the spread of the virus has led to delays in record keeping.
The largest annual increases in house prices occurred in Phoenix (12.7%), Seattle (11.7%) and San Diego (11.6%).
The smallest increases occurred in New York (6%) and Chicago (6.3%) and Las Vegas (6.4%) – cities that were hit hard by the virus or from which the local economies suffered the most.
Big picture: Home sales are not expected to decline too much, even if not in the midst of a coronavirus outbreak. Super low rates and the growing prospects that the economy will gradually return to normal are likely to keep demand high.
This is good news for sellers, but bad news for prospective home buyers, who are unlikely to get much price break in 2021.
What are they saying? “Data over the past few months are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig J. Lazzara, global head of index investment strategy at S&P Dow Jones Indices.
Market reaction: The Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
rose in Tuesday trades. Stocks have climbed to a record high of optimism that coronavirus vaccines will soon lead to a stronger economic downturn.