April Home Price Hikes “Truly Extraordinary” Says S&P Case-Shiller
Home prices in April were up 14.6% annually in April, up from 13.3% in March, according to the S&P CoreLogic Case-Shiller National Home Price Index.
Among the major cities covered by the index, the composite of 10 cities rose 14.4% year over year, compared to 12.9% the month before. The 20-city composite was 14.9% higher, down from 13.4% in March.
Phoenix, San Diego and Seattle had the highest year-over-year gains. All have increased by more than 20% compared to the previous year.
“April’s performance was truly extraordinary. The National Composite’s 14.6% gain is literally the highest result in over 30 years of S&P CoreLogic Case-Shiller data,” said Craig Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow. Jones Indices.
Not only have house prices increased in all 20 cities, but price increases have also accelerated in all and have historically been in the top quartile of performance.
Five cities – Charlotte, North Carolina, Cleveland, Dallas, Denver and Seattle – posted their largest annual gains on record.
“We previously suggested that the strength of the US real estate market was due in part to the response to the COVID pandemic, as potential buyers move from city apartments to suburban homes. Data from April continues to be consistent with that. this assumption, ”added Lazzara.
Price gains have increased over the past 11 months as buyer demand continues to outstrip supply. The inventory of homes for sale edged up in May from April, but was still 21% lower than May 2020, according to the National Association of Realtors.
Home sales have been falling for several months, due to both the low supply, particularly at market entry, and very high prices. Single-family home starts also fell as home builders tried to cope with a large backlog of demand amid high prices for land, labor and materials.
There is more and more talk of a price bubble in the real estate market, but the fundamentals of the current market say the opposite.
“Although house price growth is reaching new highs, the risk of price declines has fallen well below pre-pandemic levels and in the summer of 2006, when house prices hit their last peak. This is likely due to the fact that favorable mortgage rates and income growth continue to keep the monthly payments to household income ratio much lower today, ”said Selma Hepp, deputy chief economist at CoreLogic.
“Therefore, the high demand from buyers, coupled with the lack of inventory to sell, will continue to put pressure on prices – which are expected to remain at double-digit increases until the third quarter of 2021,” she added. .
There is, however, a growing gap between the haves and the have-nots when it comes to housing.
Selling activity increases dramatically in the upper segment of the market, but decreases in the lower segment as the buyers’ price increases. Some criticize the Federal Reserve for keeping mortgage rates artificially low, thanks to its bond buying program. Record rates last year helped fuel the home buying boom, but these rates, now slightly higher, cannot offset the huge price gains.
“Too bad for the Fed’s overall monetary policy, where low-income people can no longer afford housing,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group.