Home prices surge in January after months of growth deceleration, data shows

Home prices rose in January, with growth re-accelerating ahead of this year's spring homebuying season. (iStock)

Home prices surged 19.2% annually in January, according to the latest S&P CoreLogic Case-Shiller Indices, a measure of U.S. home prices. This marks the highest annual increase for any January on record and was a turnaround from the past several months that saw annual home price gains decelerating.

This increase is up from the 18.9% annual home price gain seen in December. On a month-over-month basis, the home price index increased 1.1% from December to January alone, according to the report. 

"Last fall we observed that home prices, although continuing to rise quite sharply, had begun to decelerate," S&P DJI Managing Director Craig Lazzara said. "Even that modest deceleration was on pause in January. The 19.2% year-over-year change for January was the fourth-largest reading in 35 years of history."

Borrowers can take advantage of this strong gain by tapping into their home equity through a cash-out refinance. Visit Credible to find your personalized interest rate and get prequalified in minutes without affecting your credit score.


Many cities see home price growth re-accelerate in January

About 80% of metros saw home price growth re-accelerate in January after slowing down at the end of last year, according to the report. Some of the strongest gains were in Florida and Arizona. 

"After four months of slowing or flat growth, home price growth sped up in January, and the S&P CoreLogic Case-Shiller Index registered a 19.2% year-over-year increase – the strongest January year-over-year increase in [the] series’ history," CoreLogic Deputy Chief Economist Selma Hepp said. "Eight in 10 metros experienced re-hastening of home price gains, particularly those in the West and along the Southeast."

The average home price gain for the top 10 cities increased 17.5% annually, up from last month’s annual increase of 17.1%. When looking at the top 20 cities, home prices increased 19.1% annually, up from 18.6% in December. 

Of the top cities, Phoenix, Tampa and Miami saw the highest annual home price gains at 32.6%, 30.8% and 28.1%, respectively. This marks nearly three years (32 months) where Phoenix has led the way in home price gains, the report said.

If you are interested in taking advantage of rising home prices, you could consider a cash-out refinance to tap into your home equity. Visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.


Expert says home price re-acceleration was expected

Although interest rates are rising  with the 30-year mortgage rate sitting well above the 4% mark, according to the latest data from Freddie Mac  home price growth has not slowed. But one expert said this re-acceleration in the housing market was not surprising as demand continued to put upward pressure on low inventory going into the spring buying season.  

"While the re-acceleration of home price gains may be concerning, and likely discouraging for first-time and younger buyers, it is nevertheless unsurprising considering the dire inventory of for-sale homes, which continues to decline and continually record new lows," Hepp said. "With mortgage rates jumping to three-year highs, existing homeowners now have little incentive to sell and buy a new, more expensive home with a higher mortgage rate. 

"And while surging interest rates were expected to have a dampening effect on demand, there are still many buyers in the market who are able to afford the rising costs of homeownership," she said. "As a result, buyer competition this spring surged again and two out of three homes sold over the asking price – the same as last summer's peak."

Moving forward, economists have forecasted that home price appreciation could begin to slow once again as the Fed continues to push interest rates higher in the year ahead. 

"The macroeconomic environment is evolving rapidly," Lazzara said. "Declining COVID cases and a resumption of general economic activity has stoked inflation, and the Federal Reserve has begun to increase interest rates in response. We may soon begin to see the impact of increasing mortgage rates on home prices."

If you are interested in tapping your home equity before rates move higher, you could consider refinancing with a cash-out mortgage now. Contact Credible to speak to a home loan expert to see if this is the right option for you.

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.