Home price growth in the U.S. kicked off 2021 surging to a new record.

Standard & Poor’s said Tuesday that its S&P CoreLogic Case-Shiller national home price index posted a 11.2% annual gain in January, up from 10.4% in December — reaching its highest recorded level since February 2006. The results surpassed estimates of a 10.5% year-over-year gain, according to consensus compiled by Bloomberg. The 20-City Composite posted a 11.1% annual gain, up from 10.2% the previous month, also beating consensus estimates of 11.2%, according to Bloomberg.

“The strong price gains that we observed in the last half of 2020 continued into the first month of the new year. January’s performance is particularly impressive in historical context. In more than 30 years of S&P CoreLogic Case-Shiller data, January’s year-over-year change is comfortably in the top decile,” said Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, in a press statement. “The trend of accelerating prices that began in June 2020 has now reached its eighth month and is also reflected in the 10- and 20-City Composites (up 10.9% and 11.1%, respectively). The market’s strength is broadly-based: all 20 cities rose, and all 20 cities gained more in the 12 months ended in January 2021 than they had gained in the 12 months ended in December 2020.”

The usual crop of cities topped the 20-City Composite: Phoenix, Seattle, and San Diego. Phoenix has now led all the other cities in the index for the 20th straight month with an annual gain of 15.8%. It was followed by Seattle, which posted a 14.3% annual gain and San Diego with a 14.2% annual gain.

“The housing market momentum that had picked up pace at the end of 2020 spilled over into the early months of 2021, upending the traditionally slow home-buying season. Further declines in mortgage rates — which hit all-time lows at the end of December — helped carry the strong momentum, but also amplified demand from millennials and those seeking second homes,” said CoreLogic Deputy Chief Economist Selma Hepp, in a press statement prior to the results. “Additionally, housing inventories are not showing any signs of improvement. In fact, data shows they are reaching historical troughs, which is putting additional pressure on home prices.”

Inventory, or the number of homes for sale, hit a new bottom of 1.03 million units in January and remained at that level last month, according to the National Realtors Association. During the winter season inventory tends to increase, but that did not occur this year, according to NAR Chief Economist Lawrence Yun. In fact, inventory plunged 29.5% in February from the same time last year — the largest annual decline on record. Currently there's a two-month supply of inventory at the current sales pace.

“Tight inventories and a rise in demand for homes, as reflected in strong home sales volumes in the second half of 2020, will likely continue to support home prices in the coming month,” Barclays wrote in a recent note.

However, some economists warn that the slowdown in pending home sales (a leading indicator of the health of the housing market) in recent months and rise in interest rates above 3%, levels not seen since July 2020 may put the brakes on home price growth for the rest of the year.

“We expect existing home sales to cool this year, homebuilding to glide higher and price appreciation to moderate,” said BofA Securities in a recent note.

Amanda Fung is an editor at Yahoo Finance.

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