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PNC Senior Economist Abbey Omodunbi: House Price Growth Accelerated in December;

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2021 Marked the Strongest Calendar Increase on Record

  • House price appreciation, as measured by the S&P CoreLogic Case-Shiller 20-City Composite Index, accelerated in December.

  • Longstanding supply challenges will improve this year, moderating house price growth.

  • Higher mortgage rates, as the Federal Reserve wraps up its asset purchases and potentially starts quantitative tightening this year, will weigh on house price growth this year.

House price appreciation in December, as measured by the S&P CoreLogic Case-Shiller 20-City Composite Index, accelerated after four straight months of deceleration. House prices were up 18.6% in December following an upwardly revised 18.4% growth rate in November. House prices are now 38.4% higher than the 2006 peak. Prices were up in December from the prior month in all 20 cities. The strongest gains from the prior month were in Phoenix (32.5%), Tampa (29.4%), and Miami (27.3%). Fifteen of the 20 cities reported higher annual price increases in December versus November. The not seasonally adjusted index was up 18.8% from December 2020, unchanged from November. 2021 marked the strongest calendar-year increase on record.

House prices rose 1.5% on the month in 20 U.S. cities, following the upwardly-revised 1.2% growth rate in the previous month. San Diego (2.5%), Seattle (2%), and Dallas (2%) reported the strongest month-over-month gains among the 20 cities in November. Minneapolis (1.2%), New York (1.0%), and Washington DC (0.7%) had the weakest gains.

The U.S. housing market finished 2021 with a bang, ending the year with the highest calendar-year increase on record. This was driven by extremely tight supply conditions and very strong demand. Pandemic-driven demand, fueled by the increase in remote work, has exposed longstanding supply challenges, driving prices higher. The inventory of existing homes for sale fell to a record-low 860,000 in January. Labor shortages and rising material costs were constraints in 2021 while a shortage of developable land continues to be a long-term constraint. Nevertheless, house price appreciation should moderate in 2022 as supply chains normalize and demand cools. Rising mortgage rates will weigh on demand and decrease affordability. Still, demand will remain solid, and the lack of inventories will continue to be the leading driver of house price growth in 2022.

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.

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