The S&P CoreLogic Case-Shiller index of home prices in 19* U.S. cities rose 5.7% in August from a year ago, the greatest year-over-year gain since 2018, driven unsurprisingly by tightened supply amid record-low interest rates.
The August increase was larger than the 4.8% advance the month prior, and the largest annual gain since July 2018, when rates sat closer to 4.52%.
“By some measures, home prices are rising at a faster pace than they ever have – an incredible feat considering the market is rising from an already elevated level. The supply of for-sale homes, already extremely tight, has only become more constrained in recent months, and historically low mortgage rates continue to encourage many buyers to enter the market,” said Matthew Speakman, economist at Zillow.
According to Speakman, this heightened competition for the few homes on the market has placed consistent, firm pressure on home prices for months now, with few signs that this will relent any time soon.
Though supply remained tight, the industry may be catching up, as single-family housing starts rose to an annual rate of 1.108 million in September, a level not seen since 2007, and up from August’s 1.021 million, according to the U.S Census Bureau.
Looking through a more localized lens, Phoenix experienced the steepest year-over-year gain, rising 9.9% – the 15th consecutive month Phoenix home prices rose more than those of any other city, the report said. Seattle took the second-greatest increase, up 8.5%, with San Diego following at 7.6%.
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According to Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, it’s a measure of the housing market’s strength that even the worst-performing cities, Chicago (1.2%) and New York (2.8%), did better in August than in July.
“A trend of accelerating increases in the index began in August 2019 but was interrupted in May and June, as COVID-related restrictions produced modestly decelerating price gains,” Lazzara said. “If future reports continue in this vein, we may soon be able to conclude that the COVID-related deceleration is behind us.”
Though home prices continued to rise in August, homebuyers showed little interest in slowing down, driving new home sales 4.6% year-over-year to a pace not seen since 2006.
*Note that typically the Case-Shiller index includes 20 cities, however, due to COVID-19 delays sufficient records for Detroit could not be generated.