U.S. Home Prices Surge to 6-Year High in September, Case-Shiller Index Shows

A house's real estate for sale sign is seen in front of a home in Arlington, Virginia, November 19, 2020. - The US real estate market is booming even as the coronavirus crisis intensifies, and the seemingly insatiable appetite for new and older homes has sent prices soaring -- meaning more and more families with modest incomes are seeing their dreams of owning property shattered. (Photo by SAUL LOEB / AFP) (Photo by SAUL LOEB/AFP via Getty Images)

The numbers: The cost of buying a house rose sharply again in September and by one measure hit a six-year high, a Case-Shiller index showed, signaling that prospective buyers are unlikely to find better deals any time soon.

A measure of home prices in 20 large cities rose at a 6.6% yearly pace in October, according to the S&P CoreLogic Case-Shiller price index. That’s up from 5.3% in the prior month.

Wall Street economists had forecast a 5.4% increase.

A broader measure by Case-Shiller that covers the entire country showed a similarly large 7% increase in home prices over the past year, marking the fastest 12-month gain since 2014.

Home prices have actually risen faster during the worst pandemic in a century instead of getting cheaper. Rock-bottom mortgage rates and a flush of people leaving cities during the pandemic for more space in the suburbs and beyond has boosted demand at a time when the supply of home for sales is near a historic low.

On a monthly basis, the Case-Shiller 20-city index rose 1.2% in September.

What happened: Prices rose in 19 of the 20 large cities tracked by Case-Shiller. The lone exception, Detroit, likely registered higher prices as well, but Case-Shiller could not collect enough data because of rising COVID-19 cases in the area.

The biggest increases took place in Phoenix, Seattle and San Diego. The smallest were in New York and Dallas. New York has seen a particularly large outflow of residents after suffering a huge number of COVID-19 cases early in the pandemic. Dallas was another hard-hit area.

Big picture: Home sales might slow a bit in the face of a record surge in coronavirus cases and a softer economy. But don’t expect demand — or prices — to taper off all that much, especially if the pending vaccines turn out to be effective and widely available. Sales are at the highest level in years and likely to stay that way if the economic rebound picks up the pace.

Market reaction: The Dow Jones Industrial Average and S&P 500 rose in Tuesday trades. The Dow moved within 100 points of the 30,000 mark.