Home price growth in the U.S. surged in April at a pace not seen in more than 30 years.
Standard & Poor’s said Tuesday that its S&P CoreLogic Case-Shiller national home price index posted a 14.6% annual gain in April, up from 13.3% in March — marking the 11th straight month of accelerating prices. The 20-City Composite posted a 14.9% annual gain, up from 13.4% a month earlier. The results far outpaced analysts’ expectations of a 14.7% annual gain, according to Bloomberg consensus estimates.
“April’s performance was truly extraordinary. The 14.6% gain in the National Composite is literally the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data,” said Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, in a press statement. “Housing prices in all 20 cities rose; price gains in all 20 cities accelerated; price gains in all 20 cities were in the top quartile of historical performance.”This content is not available due to your privacy preferences.Update your settings here to see it.
Phoenix, Dan Diego, and Seattle continued to lead the 20-City composite. Phoenix led for the 23rd month in a row posting a 22.3% annual increase, followed by San Diego with a 21.6% increase and Seattle with a 20.2% increase.
Boston Federal Reserve President Eric Rosengren told Yahoo Finance last week that he was “concerned about rising home prices, but noted that the hot real estate market is “not at a point where we should be panicked.”
The results were expected and follow similar data pointing to skyrocketing home prices well into the busy spring season. Last week, the National Association of Realtors (NAR) reported that the median existing-home price for all housing types in May was $350,300, up 23.6% from May 2020 ($283,500), as every region registered price increases — a record high and marking 111 straight months of year-over-year gains since March 2012.
“While the acceleration may be met with concerns, mortgage interest rates remain 50% lower than they were in 2005, when home price growth last peaked, keeping the ratio of mortgage payments to monthly households income lower today,” CoreLogic Deputy Chief Economist Selma Hepp said in a press statement. “It’s probably that continued massive demand will keep pressure on prices, which are likely to remain at double-digit growth rate throughout the remainder of 2021.”
“Higher costs for building materials and labor have been putting upwards pressure on home prices. Strong demand for homes coupled with tight inventories should support further home prices gains,” said Bank of America in a recent research note. BofA expected a 14% annual increased in the index.
A new report from the NAR found that the housing market needs to build at least 5.5 million new units, both single-family and multi-family homes, just to keep up with demand and keep home ownership affordable over the next decade.
Total housing inventory at the end of May amounted to 1.23 million units, up 7.0% from April’s inventory and down 20.6% from one year ago, according to the NAR. Unsold inventory sits at a 2.5-month supply at the present sales pace, marginally up from April’s 2.4-month supply but down from 4.6 months in May 2020.
The lack of homes for sales is also slowing home buying activity. Existing home sales slid for the fourth straight month in May, according to the NAR.
“Home sales fell moderately in May and are now approaching pre-pandemic activity,” said Lawrence Yun, NAR’s chief economist, in a press statement. “Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market.”