Residential House Price Growth Will Cool in 2021

• The S&P CoreLogic Case-Shiller U.S. national home price index rose 11.2% in January from one year earlier.
• The S&P CoreLogic Case-Shiller 20-City home price index rose 11.1% in January from one year earlier; 14 out of 20 cities saw double-digit year-over-year gains.
• Longstanding supply challenges coupled with strong demand during the pandemic have supported residential house price growth; PNC expects moderate house price growth in 2021.

The not seasonally adjusted S&P CoreLogic Case-Shiller U.S. national home index rose 11.2% in January from one year earlier, following the upwardly revised 10.4% gain in December. The S&P CoreLogic Case-Shiller 20-City index rose 1.2% in January from the prior month, the slowest monthly increase since August; prices were up from the prior month in all 20 cities. The strongest gains from the prior month were in Phoenix (up 1.9%), Seattle (up 1.5%) and San Diego (up 1.4%). 

The S&P CoreLogic Case-Shiller home price indices are repeat-sales indices which track the three-month moving averages of single-family house prices in the U.S. House prices were 11.1% higher in January on a year-ago basis in 20 U.S. cities. Phoenix (15.8%), Seattle (14.3%) and San Diego (14.2%) had the strongest gains from the prior year while Las Vegas (8.6%), Chicago (9.0%) and Dallas (9.2%) had the weakest gains. 

The U.S. housing market closed 2020 with a bang, ending the year with the strongest annual price growth since 2013. The strong house price growth was mainly due to extremely tight supply conditions coupled with very strong demand. Strong demand for housing during the pandemic has exacerbated longstanding supply challenges; as of the end of February, housing inventory for existing homes for sale was at a record-low 1.03 million units. House price growth will likely decelerate in 2021 as the pandemic gets under control and sellers feel more comfortable listing their homes.  In addition, the run-up in prices and rising mortgage rates will erode affordability, weakening demand in 2021. PNC expects residential construction to continue to boost the overall economy in 2021.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.