Home prices rose sharply yet again in January, although they may not stay that way for much longer, as the effects of coronavirus reverberate throughout the global economy.
The national home price index shows a 3.9% annual gain during the first month of this year, up from 3.7% in December, according to the latest numbers from the Case-Shiller index.
The 10-city composite, which covers home prices in big cities such as New York and Los Angeles, was 2.6%, up from 2.3% the previous month. The broader 20-city composite was 3.1%, up from 2.8% just a month earlier.
But the Case-Shiller Index is a full two months behind, meaning we can’t see any of the effects of coronavirus on home prices just yet.
“It may have been only two months ago, but in many ways it might as well be ancient history,” said Matthew Speakman, an economist at Zillow, summing up this week’s report. Up until now, high demand for houses as well as a tight supply and lower mortgage rates were driving up home-price growth to levels not seen in years. At the same time, slowly-growing wages meant home-buying was already out of reach for many lower-income Americans.
But the coronavirus pandemic has thrown the country into a recession, a fact that the housing market and home prices will take a few months to reflect. It’s still not certain exactly how the housing market will be affected by the recession. Factors such as how long it takes the US and other countries to contain the spread of the disease, how long businesses are able to keep workers employed, and how much consumers’ pocketbooks are hit will determine the bleed-over into the housing market.
“Indeed, the world is a very different place than it was in January, but today’s Case Shiller release is sure to offer … some hope that the industry can continue the growing momentum it was riding to begin the year once this crisis passes,” Speakman said in a press release sent out on Tuesday morning.
In the report’s press release, S&P, which publishes the Case-Shiller report, even added a note that caveated the results. “The COVID-19 pandemic did not begin to take hold in the U.S. until late February, and thus whatever impact it will have on housing prices is not reflected in today’s data,” said Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices.
Potential home-buyers and other consumers are feeling anxious right now because they, like Lazzara, don’t know how the upcoming recession will affect their bottom line.
A recent first-time home-buyer felt confident in her decision to buy ahead of the arrival of the virus. Patricia Cárdenas, 27, is a high school teacher who purchased her 2-bed, 1.5-bath house in Azusa, California in November. Originally, she planned to wait until summer break of 2020 to buy, when she knew she would have time off from work. “As a teacher, summer is full of possibilities. I thought it would be a good time to go house hunting and touring and seeing.” But when she saw her current house, she moved to put in an offer quickly because she loved the property and the renovations that had been done.
Cárdenas is glad she made the purchase when she did. But if she was still house-hunting now, “I might have even held off on it a little bit,” Cárdenas said, whose school has moved to online classes due to coronavirus. “I would hope that [my salary] continues until next school year, but that would definitely cause unease because I wouldn’t know if I could pay a mortgage, rent or living expenses.”