Home prices rose 18.8% in 2021 - the biggest increase in 34 years - with Phoenix and Tampa seeing the biggest jumps: COVID drove migration away from the Northeast
- US home prices saw their biggest increase in at least 34 years in 2021
- Home prices surged 18.8 percent last year, according to data released Tuesday
- Mass migration to the South, Southwest and Mountain West drove increases
- Home prices in Phoenix rose the most at 32.5%, and in Tampa they jumped 29.4%
- San Diego, Las Vegas, Denver and Los Angeles also saw strong increases
- People moving out of the Northeast bid prices up amid limited supply
US home prices saw their biggest increase in at least 34 years in 2021, according to data released Tuesday, as buyers spent the year snapping up homes and builders struggled to keep up.
Home prices surged 18.8 percent last year, according to the S&P CoreLogic Case-Shiller US National Home Price index, the biggest jump since its creation and much more than the 10.4 percent jump seen in 2020.
Fueled by remote work and booming regional economies, mass migration to the South, Southwest and Mountain West drove some of the sharpest increases in home prices, as demand outstripped supply.
The biggest increase in home prices took place in Phoenix, where they rose 32.5 percent. Other hotspots include Tampa, where the jump was 29.4 percent, and in Miami, which saw a 27.3 percent rise.
There was also strong price appreciation in San Diego, Las Vegas, Denver and Los Angeles.
'The influx of new investment is pulling in new residents from the Northeast, many of whom have sold homes at prices well above the median in Tampa and Miami, which allows them to bid aggressively for the paucity of homes that are on the market,' said Mark Vitner, a senior economist at Wells Fargo in Charlotte, North Carolina.
Home prices surged 18.8 percent last year, according to the S&P CoreLogic Case-Shiller US National Home Price index, the biggest jump since its creation in 1988
A separate report Tuesday from the Federal Housing Finance Agency showing home prices increased 17.6 percent in the 12 months through December after a similar gain in November.
There were big gains in the Mountain, Pacific, South Atlantic, East South Central, West South Central and New England regions.
Though mortgage rates are near three-year highs, they are expected to remain low by historical standards.
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'Consequently, house prices will extend their upward trend in 2022 driven by a combination of limited supply and steadily rising demand,' said Brent Campbell, an economist at Moody's Analytics, in West Chester, Pennsylvania.
Record low housing supply is driving up prices. The backlog of homes approved for construction but yet to be started is at an all-time high as builders struggle with shortages and higher prices for inputs like softwood lumber for framing, as well as cabinets, garage doors, countertops and appliances.
A separate report Tuesday from the Federal Housing Finance Agency showing home prices increased 17.6 percent in the 12 months through December
The US real estate market last year saw the most existing homes sold in 15 years, with sales topping six million even as supply sunk to an all-time low by the close of the year.
Builders have had to deal with double-digit increases in material costs as well as a shortage of workers.
That pushed home prices higher, and played a role in consumer prices experiencing their largest jump in decades.
The inflation wave is expected to ease this year as the Federal Reserve raises interest rates and global supply chain snarls ease, and Craig J. Lazzara, Managing Director at S&P Dow Jones Indices, predicted higher lending rates may also cool the housing market.
'In the short term... we should soon begin to see the impact of increasing mortgage rates on home prices,' he said.
Lazzara said jump in prices compared to 2020 appeared to be moderating near the end of the year, but in December, they ticked upwards again.
As for the causes of the house-buying boom, 'We have previously suggested that the strength in the US housing market is being driven in part by a change in locational preferences as households react to the Covid pandemic,' he said.
'More data will be required to understand whether this demand surge simply represents an acceleration of purchases that would have occurred over the next several years rather than a more permanent secular change.'
Rent across America's biggest cities soared by 20% last year - and the hike was even higher in Miami, Boston and NYC
Rent costs have exploded across the country in the past year as the people who moved back in with their families during the pandemic returned to the limited rental market - sending prices soaring.
An average of a 20 per cent increase across the US's biggest 50 cities has forced many renters to dig deep into their savings, downsize to subpar units or fall behind on payments and risk eviction now that a federal moratorium has ended.
Nowhere was the jump bigger than in the Miami metro area, where the median rent surged to a whopping $2,850, 49.8 percent higher than the previous year.
Meanwhile, Boston has nearly overtaken San Francisco as the nation's most expensive rental market with a nearly 27 percent increase in properties with two bedrooms, according to a recent Zumper study.
In New York City, rent prices increased 22.8 percent year-over-year, while Los Angeles saw a bit more subtle 14 percent increase.
Across the 50 largest US metro areas, median rent rose an astounding 19.3 percent from December 2020 to December 2021, according to a Realtor.com analysis of properties with two or fewer bedrooms.
Experts say many factors are responsible for astronomical rents, including a nationwide housing shortage, extremely low rental vacancies and unrelenting demand as young adults continue to enter the crowded market.
Whitney Airgood-Obrycki, lead author of a recent report from Harvard University's Joint Center for Housing Studies, said there was a lot of 'pent-up demand' after the initial months of the pandemic, when many young people moved back home with their parents.
Starting last year, as the economy opened up and young people moved out, 'rents really took off,' she said.
Pictured: top ten US housing markets for rent increases, year-over-year December 2021
Miami renter Krystal Guerra, 32, has a tiny kitchen, cracked tiles, warped cabinets, no dishwasher and hardly any storage space.
But Guerra said she was fine with the apartment's shortcomings, until a new owner bought the property and told her he was raising the rent from $1,550 to $1,950, a 26 percent increase that Guerra said meant her rent would account for the majority of her take-home pay from the University of Miami.
'I thought that was insane,' said Guerra, who decided to move out.
'Am I supposed to stop paying for everything else I have going on in my life just so I can pay rent? That's unsustainable.'
And Miami renters like Guerra are hardly alone, as rent prices throughout the state of Florida and beyond continue to soar.
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Other cities across Florida - Tampa, Orlando and Jacksonville - and the Sun Belt destinations of San Diego, Las Vegas, Austin, Texas, and Memphis, Tennessee, all saw spikes of more than 25 percent during that time period.
Rising rents are an increasing driver of high inflation that has become one of the nation's top economic problems. Labor Department data, which covers existing rents as well as new listings, shows much smaller increases, but these are also picking up.
Rental costs rose 0.5 percent in January from December, the Labor Department said last week. That may seem small, but it was the biggest increase in 20 years, and will likely accelerate.
Economists worry about the impact of rent increases on inflation because the big jumps in new leases feed into the US consumer price index, which is used to measure inflation.
Inflation jumped 7.5 percent in January from a year earlier, the biggest increase in four decades.
While many economists expect that to decrease as pandemic-disrupted supply chains unravel, rising rents could keep inflation high through the end of the year since housing costs make up one-third of the consumer price index.
According to the US Census Bureau, rental vacancy rates during the fourth quarter of 2021 fell to 5.6 percent, the lowest since 1984.
'Without a lot of rental vacancy that landlords are accustomed to having, that gives them some pricing power because they're not sitting on empty units that they need to fill,' said Danielle Hale, Realtor.com's chief economist.
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