Home Prices Surge at Record Pace in June on Fierce Competition
U.S. home prices surged 18.6% in June from a year earlier, the biggest jump ever recorded in the S&P CoreLogic Case-Shiller National Home Price Index.
The pace was faster than the 16.6% annualized gain recorded in the prior month, which was the previous record in data that goes back more than three decades, according to Tuesday’s report. The index is based on a three-month rolling average of repeat sales in the U.S.
Home prices are being driven by demand sparked by the Covid-19 pandemic as people sought homes in less dense areas, according to Craig Lazzara, an S&P Dow Jones Indices managing director.
“The strength in the U.S. housing market is being driven in part by a reaction to the Covid pandemic, as potential buyers move from urban apartments to suburban homes,” said Craig Lazzara, an S&P Dow Jones Indices managing director. “This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing.”
The metropolitan areas surrounding Boston, Cleveland, Dallas, Denver, Seattle, and Charlotte, North Carolina, all recorded their all-time highest 12-month gains, the report said. For Boston, the increase was 18.6%, in Cleveland the gain was 15.4%, in Dallas it was 21.3%, in Denver it was 19.6%, in Seattle it was 25%, and in Charlotte the gain was 19%, according to the report.
A separate home-price report issued on Tuesday that tracks home transactions funded by mortgages backed by Fannie Mae and Freddie Mac also showed a record gain in June. The data from the Federal Housing Finance Agency goes back almost five decades.
The FHFA report showed prices rose 17.4% in the second quarter from a year earlier, capped by a record 12-month gain of 18.8% in June, according to Lynn Fisher, deputy director of FHFA’s Division of Research and Statistics.
House prices rose in all of the nation’s biggest 100 metropolitan areas, according to the FHFA report, led by a 41% spike in Boise City, Idaho. Prices were weakest in the San Francisco metro area, which saw a gain of 4.5%, the report said.
More than a decade of underbuilding in the wake of the 2008 financial crisis meant the housing market was grappling with a shortage of inventory before the pandemic hit the U.S. last year, according to Lawrence Yun, chief economist of the National Association of Realtors.
After the Federal Reserve began buying mortgage bonds in March 2020 to support the economy during the pandemic’s economic shock, rates for home loans plummeted to record lows, which boosted demand, he said.
Inventory has begun to increase as homebuilders create more supply, Yun said. That should help to slow the pace of price gains in future months by reducing bidding wars.
“The market may be starting to cool slightly, but at the moment there is not enough supply to match the demand from would-be buyers,” Yun said. “That said, inventory is slowly increasing and home shoppers should begin to see more options in the coming months.”