San Diego closed out 2021 with home prices up 25.9% in a year - near a record high.

The S&P CoreLogic Case-Shiller Indices reported that San Diego metro had the fifth-highest price increases in the nation on an annual basis. The top markets were Phoenix, up 32.5 percent, and Tampa, up 29.4 percent.

San Diego metro, which includes all of the county, has seen big price increases before — but it has been a while since a runup in prices has lasted so long. Annual prices have increased at double-digit rates on a monthly basis since October 2020.

But nothing has touched the record set in July 2004 when San Diego saw prices increase 33.4 percent in a year. The highest in 2021 was in July when the price increased 27.8 percent annually.

Nationwide prices were up 18.8 percent in a year, its highest in 34 years of data, with experts pointing to a surge in buying to end the year as mortgage rates rose. Similar to what has been reported by San Diego real estate agents, higher rates only pushed buyers to get off the fence before rates go up even more.

“This suggests that home buyers have not yet thrown in the towel,” wrote CoreLogic deputy chief economist Selma Hepp.

She said 15 of the metros (including San Diego) covered by the 20-city index experienced a pick-up in prices to end 2021. Hepp said buyers do not seem to be stopped by rising rates, but it remains to be seen what happens if they go up more and buyers can’t stomach surging monthly payments.

The Case-Shiller Indices are different than just looking at the median home price. It takes into consideration repeat sales of identical single-family houses — and are seasonally adjusted — as they turn over through the years. The median price for a resale single-family house in San Diego County in December was $820,000.

Increases in mortgage rates mean a home at the median price, assuming a 30-year fixed-rate mortgage with a 20 percent down payment, mean greatly increased costs for buyers.

Economist Matthew Speakman said a lack of homes for sale across the nation in December pushed prices up just about everywhere. Competition among buyers has meant many offers are exceeding the asking price.

“While the scarce selection has likely dissuaded some would-be shoppers from testing the market,” he wrote, “overall demand for homebuying remained very strong by historic norms.”

Speakman wrote that rising rates may test demand in the coming months but early indications show competition has continued to be strong in 2022.

Rates are expected to increase because Federal Reserve officials have indicated they will likely increase the benchmark interest rate up several times this year. Mortgage rates usually follow the yields on mortgage-backed securities. These bonds typically track the yield on the U.S. 10-year Treasury.

In December, San Diego experienced the most rapid price gains of any California market. Prices were up annually in Los Angeles by 19.3 percent and San Francisco by 18.8 percent. The slowest market was Washington, D.C., up 10.5 percent. All 20 metros in the index saw increases last year and all were at all-time high prices.

Source: SDuniontribune by Phillip Molnar