Home prices increased across the board in May, leaping 16.6% annually in the latest S&P CoreLogic Case-Shiller National Home Price Index report.
It’s the 12th consecutive month of accelerating prices, and May’s increase set a new record — following the prior month’s record-breaking increase of 14.8%.
“A month ago, I described April’s performance as ‘truly extraordinary,’ and this month I find myself running out of superlatives,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI. “We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. May’s data continue to be consistent with this hypothesis.”
Lazzara said home prices in May stood at all-time highs in 18 of the 20 S&P cities surveyed, and five cities – Charlotte, Cleveland, Dallas, Denver, and Seattle – recorded their all-time highest 12-month gains.
“This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years, but there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing,” Lazzara said. “More time and data will be required to analyze this question.”
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Phoenix’s 25.9% increase led all cities for the 24th consecutive month in accelerating home prices, with San Diego (+24.7%) and Seattle (+23.4%) close behind. Prices were strongest in the West (+19.9%) and Southwest (+19.8%), but every region logged double-digit gains from April to May.
All 20 cities reported higher price increases in the year ending May 2021 versus the year ending April 2021.
The Federal Housing Finance Agency also released its U.S. House Price Index, noting that prices rose 1.7% nationwide in May. Home prices rose 18% from May 2020 to May 2021.
For the nine census divisions, seasonally adjusted monthly home price changes from April 2021 to May 2021 ranged from up 1% in the Mid Atlantic division to up 2.4% in the Pacific division. The 12-month changes ranged from 15.4% in the West-South-Central division to 23.2% in the Mountain division.
“House prices continued their record-setting growth into May,” said Lynn Fisher, FHFA deputy director of research and statistics. “This trend will likely continue around the country as busy summer homebuying months maintain the pressure being felt in already tight housing markets.”
George Ratiu, Realtor.com senior economist, said the combination of historically-low mortgage rates, business re-openings and the lifting of pandemic restrictions continue to fuel the current “buying frenzy.”
“On one hand, mortgage rates have been dropping for a month, moving toward the lows we saw in January and February of this year,” Ratiu said. “On the other hand, more homeowners are entering the market, with the number of freshly-listed homes for sale advancing in 14 of the last 17 weeks. This dynamic confluence of housing developments is helping keep price growth in check as we approach August.”
Added Matthew Speakman, Zillow economist: “Increased inventory levels should eventually help tame the record-high pace of price appreciation, but it’s going to take a while.”