Home prices continue to surge to amounts that we have never seen before.
According to the June S&P Case-Shiller National Index, the numbers soared 18.6% annually, which is the largest year-over-year gain in the history of the index. The 20-City Index rose 19.1% annually. On a monthly basis, the National Index rose 2.2% while the 20-City Composite posted a 2.0% increase.
Craig J. Lazzara is the Managing Director and Global Head of Index Investment Strategy at S&P DJI. He says that June 2021 is the third consecutive month in which the growth rate of housing prices set a record.
It is no mystery what has caused these soaring home prices. High demand from many buyers in the market and incredibly low inventories across the United States. While supply has been increasing month to month, it was still down 12% in July year-over-year, according to National Association of Realtors.
Phoenix, San Diego, and Seattle reported the strongest price increases of the 20 cities. Prices in Phoenix increased 29.3% year-over-year. In San Diego they rose 27.1%, and in Seattle they were up 25.0%. All 20 cities reported higher price increases in the year ending June 2021 versus the year ending May 2021.
“The last several months have been extraordinary not only in the level of price gains, but in the consistency of gains across the country,” said Lazzara, “In June, all 20 cities rose, and all 20 gained more in the 12 months ended in June than they had gained in the 12 months ended in May.”
Prices in just about every city in the 20-city index, except for Chicago, are at all-time highs, he said, as are the national composition and the 10- and 20-city indices.
Home sales, however, have started to cool. Signed contracts on existing homes dropped in July, according to the National Association of Realtors. Prices usually lag sales by about six months, so that could be a sign that price gains will stop accelerating as they have been for over a year.
Low mortgage rates continue to keep prices strong. Rates will rise if the Federal Reserve slows its purchases of mortgage-backed bonds, but so far that is not expected to happen in the near term.