U.S. home prices increased nearly 10.5 percent in 2020 as demand soared amid Covid-19 and associated state shutdowns.
The increase, tracked by the S&P Case-Shiller U.S. National Home Price Index, was the strongest annual growth since 2013. As of April, home prices were up 14.6 percent year-over-year.
According to the Federal Housing Finance Agency Purchase Only Index, regional increases mirror those overall numbers:
- Minnesota: 9.4 percent
- Illinois: 7.9 percent
- Iowa: 8.3 percent
- Missouri: 10 percent
- Oklahoma: 9 percent
- North Dakota: 7.2 percent
- South Dakota: 8.5 percent
- Texas: 9 percent
The greatest regional growth was seen in Pacific Northwest and Mountain states, including Idaho (20.9 percent), Montana (15.5 percent), Utah (15.5 percent) and Washington (13.7 percent). Also, strong price appreciation was seen in New England, including Connecticut (14.2 percent), Maine (13.9 percent), New Hampshire (13.5 percent) and Rhode Island (13.2 percent). Home prices in Central and noncontiguous states were lower, but still saw robust price gains. Home values increased less than 8 percent in only six states (Louisiana, Hawaii, North Dakota, Alaska, Illinois and West Virginia).
According to the ABA, home prices also increased in nonmetropolitan areas of the country. However, some regions saw home values decline over 2020, including the northern half of the Appalachian Mountains, land along the Mississippi Delta and in areas throughout the Midwest and Southwest. Supplies have lagged demand. Fierce competition among homebuyers, with homes often selling above listed price, depleted existing home inventories to near-record lows. While new housing starts are increasing, shortage of skilled labor, supply chain bottlenecks and materials shortages drastically increased the costs of construction and dampened building activity. Lumber prices reached record highs this spring. Tight inventories and continued supply-chain constraints are expected to maintain upward pressure on home prices into 2023.
Joe Witt, Minnesota Bankers Association president/CEO, noted many banks focusing on mortgage lending “have been super busy,” first with refinancing during Covid-19 and then handling purchase loans. Anecdotally speaking, he said some have said houses have been bought before even being listed. In other instances, multiple bids are placed on a single home, or homebuyers waive inspections. Witt attributes the booming housing market to the pandemic and its related shutdowns along with public desire to leave densely populated urban centers during Covid-19.
“It’s definitely a seller’s market out there,” he said.