U.S. home prices soared to a record high in 2021 as low mortgage rates fueled buyers to rush into a market with ultra-low inventory, according to a home price index.

Home prices soared 18.8% in 2021, according to the S&P CoreLogic Case-Schiller U.S. National Home Price Index, the largest increase since the index was created 34 years ago. The soaring home prices were fueled by record low inventory, strong consumer demand and low mortgage rates, Craig J. Lazzara, managing director at S&P DJI, said in the report.

Low inventory led to bidding wars which pushed homes to record highs, the WSJ reported. Low inventory continued into 2022, causing the number of homes for sale to dip to a new low of 860,000 in January, the National Association of Realtors said in a report.

Across the US rent is rising so fast that in many cities buying has become more affordable than renting, even with sky-high home sale prices https://t.co/2MBiASAtCo

— CNN (@CNN) February 22, 2022

“The inventory of homes on the market remains woefully depleted, and in fact is currently at an all-time low,” Lawrence Yu, NAR’s chief economist, said in the report.

Home sales in January surged to an annual rate of 6.5 million, a 6.5% increase from December, according to the NAR. The median existing-home price surged 15.4% in January on a year-over-year basis. (RELATED: US Economy Grew Faster Than Expected At The End Of 2021)

“Buyers were likely anticipating further rate increases and locking-in at the low rates, and investors added to overall demand with all-cash offers,” Yun said. “Consequently, housing prices continue to move solidly higher.”

Surging home prices are expected to decelerate further into 2022 as mortgage rates continue to increase. The 30-year fixed-rate mortgage reached its highest level since May 2019, rising to 3.92%, according to Freddie Mac.

“The surge in mortgage rates is likely to take a bite out of the demand for housing, mostly among first-time buyers and those with limited budget,” Selma Hepp, deputy chief economist at CoreLogic, to the WSJ.

Meanwhile, Phoenix, Tampa Bay and Miami reported the highest annual gain in the Case-Schiller’s 20 city index, with prices increasing 32.5%, 29.4% and 27.3%, respectively.

“We continue to see very strong growth at the city level,” Lazzara said. “All 20 cities saw price increases in 2021, and prices in all 20 are at their all-time highs.”

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