11 US cities where house prices have risen more than 20% in one year
The housing market is getting hotter, especially in parts of the United States known for hot weather. Home prices in the United States rose 19.2% on an annual basis in January, according to the S&P CoreLogic Case-Shiller Index, and prices rose much more in Sunbelt cities like Phoenix and Tampa.
The record price growth is due to a surge in demand for homes over the past two years, combined with a severe shortage of inventory. Rising mortgage rates only compound the market mismatch: in recent months, would-be buyers have been rushing to lock in mortgages before rates rise even further. Rising mortgage rates also mean potential sellers are more likely to stay put rather than trade in for a new home at a higher rate than their current mortgage.
“As a result,” the CoreLogic report explains, “homebuyers who remain in the market are once again facing a very competitive buying environment.”
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Earlier this month, listings platform Zillow predicted the annual rate of house price growth would hit 22% by May.
Which cities have the fastest growing house prices?
Among the cities in the S&P CoreLogic Case-Shiller 20-City Composite, Phoenix, Arizona, saw the largest annual price increase. In this city, house prices increased by 32.6% on an annual basis in January.
Eleven cities in this index recorded price increases of more than 20%. Here is the full list:
- Phoenix, Arizona: 32.6%
- Tampa, Florida: 30.8%
- Miami, Florida: 28.1%
- Dallas, TX: 27.3%
- San Diego, California: 27.1%
- Las Vegas, Nevada: 26.2%
- Seattle, Washington: 24.5%
- Charlotte, North Carolina: 24.4%
- Atlanta, Georgia: 22.5%
- San Francisco, California: 20.9%
- Denver, Colorado: 20.8%
- Los Angeles, California: 19.9%
- Portland, OR: 17.7%
- Detroit, Michigan: 14.0%
- New York, New York: 13.5%
- Cleveland, Ohio: 13.3%
- Boston, MA: 13.3%
- Chicago, Illinois: 12.5%
- Minneapolis, Minnesota: 11.8%
- Washington, D.C.: 11.2%
Sunbelt towns have become one of the hottest real estate destinations during the pandemic, with buyers seeking more space and good weather amid more flexible working arrangements. Since March 2020, home prices are up 51% in Phoenix, according to Case-Shiller data, and they’re up 40% or more in Miami, San Diego and Tampa.
Unfortunately, those looking to escape the real estate frenzy by renting rather than buying in the Sun Belt probably won’t fare much better. A recent report revealed that rental prices in the Sun Belt have increased at a rate of 22.5% over the past year. Miami has seen the fastest growth, with rental prices rising 55% between February 2021 and February 2022.
Washington, DC had the slowest growth of the 20 cities included in the index, although house prices still rose 11.2% in January from a year earlier.
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Rising Mortgage Rates Could Slow Home Prices — Eventually
While rising rates will almost certainly make an already competitive market even more competitive in the near term, there will likely come a time when rates rise enough to rein in home prices.
“The drop in COVID cases and the pick-up in general economic activity fueled inflation, and the Federal Reserve began raising interest rates in response,” said Craig J. Lazzara, chief executive of S&P. Dow Jones Indices, in a press release. “We may soon start to see the impact of rising mortgage rates on house prices.”
Higher mortgage rates create higher monthly payments, and higher monthly payments could keep some potential buyers on the sidelines until rates come down again. This reduces competition, which puts downward pressure on prices.
“Rising mortgage rates are going to zap a lot of buying power for buyers, meaning they simply won’t be able to tackle homes with the same aggressiveness they might have had before,” he said recently. Danielle Hale, Chief Economist of Realtor.com. Money said. “I think that’s going to lead to a much less intense and frenetic housing market than what we’ve seen recently.”
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