According to the S&P CoreLogic Case-Shiller National Home Price Index, house prices rose 14.6% annually in April, up from a 13.3% increase in March.
Among the larger cities covered by the index, the 10-city composite rose 14.4% year-on-year, compared with 12.9% in the previous month. The 20-city composite was 14.9% higher than March’s 13.4%.
Phoenix, San Diego, and Seattle saw the highest year-over-year increases. All increased by more than 20% compared to the previous year.
“The performance in April was truly exceptional. The 14.6% increase in the National Composite is literally the highest value in more than 30 years of S&P CoreLogic Case-Shiller data,” said Craig Lazzara, managing director and global head of Index Investment Strategy in S&P Dow Jones indices.
Not only did home prices rise in all 20 cities, but share price gains accelerated in all of them and were historically in the top quartile of performance.
Five cities – Charlotte, North Carolina, Cleveland, Dallas, Denver, and Seattle – saw their largest annual increases to date.
“We previously indicated that the strength of the US housing market is being driven in part by the response to the COVID pandemic as potential urban housing buyers move to suburban homes. The April data continues to agree with this hypothesis, ”added Lazzara.
Price gains have increased over the past 11 months as buyer demand continues to outpace supply. Home holdings for sale rose slightly in May from April, but were still 21% lower than in May 2020, according to the National Association of Realtors.
Home sales have declined in recent months, both due to the low supply, especially in the entry-level area, and due to the very high prices. Construction starts for single-family homes have also declined as builders try to keep pace with high demand for land, labor and materials when the price of land, labor and materials is high.
There is increasing talk of a price bubble in the real estate market, but today’s market fundamentals say otherwise.
“Although home price growth has hit new highs, the risk of price declines has fallen well below pre-pandemic levels and in the summer of 2006 when home prices last peaked. This is likely due to the fact that cheap mortgage rates and income growth continue to keep the mortgage quota. Payments to monthly household income are much lower today, “said Selma Hepp, deputy chief economist at CoreLogic.
“As a result, increased buyer demand, coupled with a lack of inventory to sell, will continue to put pressure on prices – which are expected to remain in double digits through the third quarter of 2021,” she added.
However, there is a growing gap between the haves and the haves in the housing sector.
Selling activity increases dramatically on the high end of the market but decreases on the lower end as more buyers are priced. Some accuse the Federal Reserve of keeping mortgage rates artificially low through its bond purchase program. Record lows last year helped accelerate the home buying boom, but these prices, which are now slightly higher, cannot offset the huge price hikes.
“So much for the Fed’s all-encompassing monetary policy where low-income people cannot now afford housing,” wrote Peter Boockvar, chief investment officer of the Bleakley Advisory Group.