U.S. home price growth hit levels in August not seen since 2018.

Standard & Poor’s said Tuesday that its S&P CoreLogic Case-Shiller national home price index posted a 5.7% annual gain in August, up from 4.8% in July. The last time the home price growth rate reached that level was in July 2018. The 20-City Composite posted a 5.2% annual gain, up from 4.1% the previous month — far outpacing analysts’ expectations of 4.2%, according to Bloomberg.

“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. We speculated last month that the accelerating trend might have resumed, and August’s results easily bear that interpretation,” said Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, in a press statement. “If future reports continue in this vein, we may soon be able to conclude that the COVID-related deceleration is behind us.”

‘Historically low inventories and record-low mortgage rates’

Prices are being lifted by record low mortgage interest rates and a shortage of homes for sale. Last week, the rate on the 30-year fixed mortgage fell to 2.8%, beating the previous low of 2.81% reached back in 1971. Housing inventory at the end of September was 1.47 million, down 19.2% from the same month a year ago, according to the National Association of Realtors (NAR).

“As long as the Fed[eral Reserve] keeps interest rates at these levels, as long as they keep pumping liquidity into the economy, there's a big tailwind behind the housing market, and we could see a bubble along the lines of what we saw in the mid-2000s sometime in 2021 or 2022,” Michael Jones, Caravel Concepts CIO, recently told Yahoo Finance.

According to the NAR, median existing-home price was $311,800, almost 15% more than in September 2019. Similarly, brokerage Redfin reported Monday that median home sale price rose 15% to its highest on record, according to its own report.

“Current home price growth is exceptionally strong given that the U.S. is [in] an economic recession, but it is the historically low inventories and record-low mortgage rates that are outweighing economic and employment headwinds and fueling the price acceleration,” CoreLogic Deputy Chief Economist Selma Hepp said in a statement.

Phoenix topped the 20-City Composite for the 15th consecutive month, posting a 9.9% annual gain in August. Seattle and San Diego followed with the highest annual gains of 8.5% and 7.6%.