San Diego home prices were up 13% in a year at the end of 2020 — the third fastest of any city in the nation.

December home prices showed market conditions during the pandemic, that resulted in substantial gains, continued into the typically sluggish winter months, the S&P CoreLogic Case-Shiller Indices reported. The last time home prices rose so fast in the San Diego metropolitan area was April 2014.

Only two other metro areas saw prices rise faster: Phoenix at 14.4% and Seattle at 13.6%. Yet all cities saw notable gains and the nationwide average increase was 10.4%.

Analysts have primarily said the increase was the result of home shortages and a lack of active listings across the nation that led to intense competition. Price gains were also linked to record low mortgage rates, stay-at-home workers seeking better spaces to do their jobs and millennials aging into homeownership.

Selma Hepp, CoreLogic deputy chief economist, said prices are likely to continue into this year with millennials continuing to push demand. But, that it is possible the rate of increases could slow.

“Acceleration in price growth is largely driven by record-low mortgage rates and the severe undersupply of for-sale homes,” she said, "(which are) two factors that may take a turn this year and relieve some of the price pressure.”

Some analysts believe home inventory will increase later this year as many potential sellers, waiting for the pandemic to end or slow, will put homes on the market and increase inventory. It is also an open question if mortgage rates can stay as low as they have been.

In December, the interest rate for a 30-year, fixed-rate mortgage was 2.68%, said Freddie Mac, down from 3.72% the year before.

The closely watched Case-Shiller indices take into consideration repeat sales of identical single-family houses — and are seasonally adjusted — as they turn over through the years. The San Diego County median home price for a resale single-family home in December was $715,500, according to CoreLogic data.

Economist Matthew Speakman said low inventory across the nation has caused houses to sell quickly, and often above asking price.

“This forces would-be buyers to move very quickly to put an offer in on a home they desire,” he said, "(and) increases the likelihood that multiple offers will be fielded by the seller and ultimately places more upward pressure on prices.”

The 19-city index showed the strongest annual growth rate in more than six years. Other California cities had large gains, but not as much as San Diego. Los Angeles was up 9.9% annually and San Francisco up 8.7%. Detroit has been off the list since March because of pandemic-related delays at its recording office.

As it has for several months, analysts at Standard & Poor’s continued to point to people leaving urban areas as a likely major factor.

“These data are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices. “This may indicate a secular shift in housing demand, or may simply represent an acceleration of moves that would have taken place over the next several years anyway.”

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S&P CoreLogic Case-Shiller Indices

Yearly increase by metropolitan area

Phoenix: 14.4 percent
Seattle: 13.6 percent
San Diego: 13 percent
Cleveland: 11.5 percent
Boston: 11.4 percent
Tampa: 10.7 percent
Washington, D.C.: 10.3 percent
Charlotte: 10.2 percent
Minneapolis: 10.2 percent
Los Angeles: 9.9 percent
New York: 9.9 percent
Portland: 9.9 percent
Denver: 9.2 percent
Miami: 9.2 percent
Atlanta: 8.9 percent
San Francisco: 8.7 percent
Dallas: 8.4 percent
Las Vegas: 7.9 percent
Chicago: 7.7 percent
Detroit: N/A
NATIONWIDE: 10.4 percent

Source: SDuniontribune by Phillip Molnar