Economic Report: Home-price gains accelerated in February before coronavirus hit the U.S. economy

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The numbers: The pace of home-price appreciation continued to hasten in February, according to a major price barometer.

The S&P CoreLogic Case-Shiller 20-city price index posted a 3.5% year-over-year gain in February, up from 3.1% the previous month. On a monthly basis, the index increased 0.5% between January and February.

The two-month lag in the data included in the price index means that the report has yet to display the effects of the coronavirus pandemic on the housing market.

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What happened: Phoenix led the nation once more with a 7.5% annual price gain in February.

Close behind was Seattle, one of the cities nationwide that became a hot spot for the coronavirus outbreak. Home prices in Seattle were up 6% year-over-year. After Seattle, Tampa, Fla., and Charlotte saw the biggest price increase. In total, 17 of the 20 cities in the index reported more substantial price increases year-over-year in February versus January.

“Prices were particularly strong in the West and Southeast, and comparatively weak in the Midwest and Northeast,” said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices.

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The big picture: The home-price index from the Federal Housing Finance Agency similarly showed a 5.7% increase in home prices between February 2019 and February 2020, underscoring the position of strength the U.S. housing market was in before the coronavirus pandemic reached U.S. shores in earnest.

What will happen to home prices as a result of the viral outbreak remains to be seen. Fannie Mae FNMA, +0.58% has actually forecast that home prices will continue to rise in spite of the pandemic.

While home sales has slowed considerably amid stay-at-home orders and a precipitous drop in consumer confidence, sellers are also taking action. Home listings have dropped considerably in recent weeks compared with a year. That’s a sign that sellers are either pulling their listings or refraining from putting their homes on the market.

Sellers who are doing this are likely hoping to protect their asking price in the face of weak demand from home buyers. Many of the fundamentals that were driving recent price increases remain — namely, the short supply of homes for sale means that buyers in the market must compete for listings.

However, if the coronavirus pandemic’s disruptions last for an extended period of time, home prices could respond in kind.

What they’re saying: “The big question now is how quickly the home listings will awaken after pause or will unemployment drag down purchase activity going forward,” Bill Banfield, executive vice president of capital markets at Quicken Loans, said. “If buyers come back faster than sellers, it could cause prices to push even higher as buyers compete over the slim choices.”