U.S. home price growth accelerated in October to its highest level in more than six years.

Standard & Poor’s said Tuesday that its S&P CoreLogic Case-Shiller national home price index posted a 8.4% annual gain in October, up from 7% in September. The growth rate marks the highest level since March 2014. The 20-City Composite posted a 7.9% annual gain, up from 6.6% the previous month — beating analysts’ estimates of 6.95%, according to Bloomberg.

“We’ve noted before that a trend of accelerating increases in the National Composite Index began in August 2019 but was interrupted in May and June, as COVID-related restrictions produced modestly decelerating price gains. Since June, our monthly readings have shown accelerating growth in home prices, and October’s results emphatically emphasize that trend,” said Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, in a press statement.

Phoenix led the 20-City Composite, yet again, for the 17th consecutive month, recording a 12.7% annual increase. Seattle and San Diego followed, posting a 11.7% and 11.6% annual increase, respectively.

“The housing market’s strength was once again broadly-based: all 19 cities for which we have October data rose, and all 19 gained more in the 12 months ended in October than they had gained in the 12 months ended in September,” said Lazzara.

‘Home prices soared in 2020’

Historically low mortgage interest rates, a shortage of homes for sale and pent-up demand from a stalled housing market due to COVID-19 lockdowns have all contributed to a hot housing market since the spring.

“Home prices tend to rise faster, as lower mortgage rates enable more people to buy homes and allow more home buyers to purchase larger and more expensive homes,” Wells Fargo wrote in a recent research note.

Mortgage interest rates continued to hit record lows in 2020. Last week, the rate on the 30-year fixed mortgage (the most common home loan) fell to 2.66% — the 16th time this year it fell to a new low — according to Freddie Mac.

Industry experts expect mortgage rates to hover around 3% and median home price to increase by 8% in 2021, according to the National Association of Realtors’ (NAR) Real Estate Forecast Summit. In November, median existing home price rose 14.6% to $310,800 from the same month a year ago, marking close to nine straight years of monthly annual increases, according to the NAR.

“Despite the tumultuous economic year, home prices soared in 2020 and are about 25% higher than the prior peak reached in the summer of 2006. As recent home purchase indicators have suggested, 2021 will start with sustained home price growth, which will likely remain throughout the year,” CoreLogic Deputy Chief Economist Selma Hepp said in a statement prior to the results. “Also, the robust underlying fundamentals that supported the remarkable housing market in 2020 will continue propping the market over the next year.”

“Housing affordability, which had greatly benefitted from falling mortgage rates, are now being challenged due to record-high home prices,” Lawrence Yun, NAR’s chief economist, said in a press statement. “That could place strain on some potential consumers, particularly first-time buyers.”

Amanda Fung is an editor at Yahoo Finance.

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