Chicago home prices ended 2020 with highest surge in 15 years

The last time prices rose by more in December was 2005, during the height of the housing boom. At that time, the index reported a 9.6-percent increase in Chicago-area home values from a year earlier. 

Looking at all months, not only December, the figure for December 2020 was the highest since June 2014, when local home prices were up 8.2 percent. 

The big increase is more evidence of the rocket fuel that a mix of low interest rates and the pandemic have put into the housing market. A year ago, just ahead of the COVID-19 crisis, the index reported Chicago-area prices were up 1 percent in December 2019 from a year earlier. At that time, 1 percent was a mark of significant improvement over a string of months where growth had been in the range of 0.5 percent. 

After dipping below 1 percent again in the initial months of the pandemic, the figure began rising steeply, as the housing market launched into recovery in the summer. In subsequent months, the index has risen fast, with September at 4.7 percent, October at 6.3 percent, November at 7.5 percent and now December at 7.7 percent. 

The 7.7-percent increase reported by Case-Shiller tracks with the 8.1-percent increase that Illinois Realtors previously reported for the Chicago metro area. Case-Shiller, whose methodology is more precise than the trade association’s, generally reports a more conservative figure than Illinois Realtors, but they don’t diverge substantially.

Nationwide, home prices were up 10.4 percent in December, the first double-digit increase since January 2014, and one of the strongest months on record. “From the perspective of more than 30 years of S&P CoreLogic Case-Shiller data, December’s year-over-year change ranks within the top decile of all reports,” Craig Lazzara, managing director and global head of index investment strategy at S&P, said in a statement.

“These data are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” Lazzara said. “This may indicate a secular shift in housing demand, or may simply represent an acceleration of moves that would have taken place over the next several years anyway. Future data will be required to address that question.”

The index “once again proved that 2020 was an unprecedented year in many ways, especially for the housing market,” said Selma Hepp, deputy chief economist for CoreLogic. “Acceleration in price growth is largely driven by record-low mortgage rates and the severe undersupply of for-sale homes, two factors that may take a turn this year and relieve some of the price pressure. But demand from millennials and existing owners, who may have been on the sidelines throughout the pandemic, is likely to persist.”

Even with the sharp increase, Chicago came in lowest on Case-Shiller’s list of 19 major US cities. (It was previously a list of 20, but Detroit data has not been available since spring 2020.) 

Next-lowest were Las Vegas, where…

Read More: Chicago home prices ended 2020 with highest surge in 15 years