U.S. home prices rose 19.2% year-over-year in January, up from 18.9% in December, according to the S&P CoreLogic Case-Shiller Index. The 10-City Composite annual increase came in at 17.5%, up from 17.1% in the previous month. The 20-City Composite posted a 19.1% year-over-year gain, up from 18.6% in the previous month.
The 19.2% year-over-year change for January was the fourth-largest reading in 35 years.
Phoenix, Tampa, and Miami reported the highest year-over-year gains among the 20 cities in January. Phoenix led the way with a 32.6% year-over-year price increase, followed by Tampa with a 30.8% increase and Miami with a 28.1% increase. Sixteen of the 20 cities reported higher price increases in the year ending January 2022 relative to prices in the year ending December 2021.
Before seasonal adjustment, the U.S. National Index posted an 1.1% month-over-month increase in January, while the 10-City and 20-City Composites both posted increases of 1.4%.
After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 1.6%, and the 10-City and 20-City Composites both posted increases of 1.8%. In January, all 20 cities reported increases before and after seasonal adjustments.
“The macroeconomic environment is evolving rapidly,” said Craig J. Lazzara, managing director at S&P DJI, in a news release. “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.”
George Ratiu, a senior economist at Realtor.com, said in a separate release: “The monthly payment for a median-priced home has jumped 30% in the past year, far outpacing even fast-rising consumer prices, up almost 8% from a year ago.”
Added Ratiu: “While the small number of homes-for-sale will keep upward pressure on prices as we move through the Spring buying season, I expect conditions to undergo noticeable adjustments in the months ahead.”
Investors seeking exposure to real estate investment trusts within the U.S. equity market may want to consider the Invesco Active U.S. Real Estate ETF (PSR), which has grown by nearly 18% over the past year. The actively managed fund follows the FTSE NAREIT Equity REITs Index, which has just fewer than 50 holdings diversified primarily across mid- and large-cap equities.
Real estate has historically been embraced because it can deliver excess returns during bull markets and has low correlation with traditional stock and bond investments. REITs might appeal to investors seeking current income, as these trusts must distribute at least 90% of their income to investors. REITs also offer an efficient way for investors to gain indirect exposure to real estate prices, as opposed to direct exposure gained through ownership of a residential property.
PSR has an expense ratio of 0.35%.
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