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Home Prices Heat Up in January as Buyers Compete Over Sparse Listings

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Home prices in the U.S. rose 19.2% in January from a year earlier as buyers competed for a dwindling supply of listings for sale.

The pace of home-price gains was faster than the 18.9% in December, according to national data from the S&P CoreLogic Case-Shiller Index reported on Tuesday. The 20-city composite index rose 19.1%, up from 18.6% in December.

Home prices continued to skyrocket at the start of the year, depite a gain in mortgage rates, as the inventory of existing homes for sale dropped to the lowest ever recorded. The national supply of home listings dropped to a record 860,000 in January, according to data from the National Association of Realtors.

"Home price changes in January 2022 continued the strength we had observed for much of the prior year," says Craig Lazzara, managing director at S&P Dow Jones Indices.

The U.S. city with the biggest gains was Phoenix, with an increase of 33% from a year ago, followed by Tampa, up 31%, and Miami, up 28%, the report said.

Dallas and San Diego home prices increased 27%, Las Vegas was up 26%, Seattle gained 25%, Charlotte increased 24%, and Atlanta gained 23%, according to the data. Prices in Denver and San Francisco gained 21%.

The average U.S. rate for a 30-year fixed mortgage was 3.45% in January, up more than a third of a percentage point from 3.1% in December, according to data from Freddie Mac. In January 2021, the monthly average was 2.74%.

Higher mortgage rates make it harder to stretch to pay more for houses because lenders qualify borrowers by measuring their monthly income against their monthly debts, including what the new mortgage payment would be. When interest rates rise, most borrowers qualify for smaller loans.

A combination of higher mortgage rates and a shortgage of listings caused pending home sales in February to drop 4.1%, according to a report from the National Association of Realtors last week.

"Buyer demand is still intense, but it's as simple as ‘one cannot buy what is not for sale,'" said Lawrence Yun, chief economist for the National Association of Realtors.

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