US home prices surged in January, jumping the most since 2006, as historically low mortgage rates fuelled the pandemic real estate rally.
The S&P CoreLogic Case-Shiller index of national property values climbed 11.2 per cent, beating the median estimate of 10.5 per cent in a Bloomberg survey of economists. The increase followed a 10.4 per cent gain in December and was the biggest jump since February 2006.
"The trend of accelerating prices that began in June 2020 has now reached its eighth month," said Craig Lazzara, global head of index investment strategy at S&P Dow Jones Indices.
Cheap borrowing costs have powered the housing market. Rates for 30-year mortgages plunged to a record low 2.65 per cent in January, boosting borrowing power as Americans sought larger properties in the suburbs. With few homes to buy, bidding wars have fuelled a frenzied market that has seen prices surge in recent months.
Sales of previously owned homes in the United States declined in February to a six-month low, reflecting a record annual drop in the number of available properties.
The tailwind provided by low borrowing costs may ease, with concern about broader inflation pressures helping to fuel a selloff in Treasuries. Since finding a nadir in January, mortgage rates have risen to 3.17 per cent, the highest in more than nine months.
In a separate report on Tuesday, the Federal Housing Finance Agency reported home prices gained 1 per cent in January from a month earlier. That missed the estimate of 1.2 per cent and was the smallest month-over-month gain since June. BLOOMBERG