The latest S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index from S&P Dow Jones Indices, covering all nine U.S. census divisions, has found that for March 2021, home prices continued to increase across the U.S., a 13.2% annual gain in March, up from 12.0% in February.
The 10-City Composite annual increase stood at 12.8% in March, up from 11.7% in the previous month, while the 20-City Composite posted a 13.3% year-over-year gain, up from 12.0% in the previous month.
The top five markets exhibiting the highest year-over-year gains in March 2021 included:
- Phoenix with a 20% year-over-year change
- San Diego with a 19.1% year-over-year change
- Seattle with an 18.3% year-over-year change
- Boston with a 14.9% year-over-year change
- Tampa with a 13.7% year-over-year change
“More than 30 years of S&P CoreLogic Case-Shiller data put these results into historical context. The National Composite’s 13.2% gain was last exceeded more than 15 years ago in December 2005, and lies very comfortably in the top decile of historical performance,” said Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. “The unusual strength is reflected across all 20 cities; March’s price gains in every city are above that city’s median level, and rank in the top quartile of all reports in 19 cities.”
All 20 cities reported higher price increases in the year ending March 2021 versus the year ending February 2021.
“A number of socioeconomic trends are driving the double-digit home price increases. Americans who could work remotely during the pandemic have likely cut costs and are eager to funnel their savings into a shrinking number of homes for sale while they can still take advantage of historically-low interest rates,” said Realtor.com Senior Economist George Ratiu. “From a demographic standpoint, millennials are coming of homeownership age and embracing life in suburbs and smaller cities, while Gen Xers need homes that can accommodate caring for college kids and aging parents, and Baby Boomers are looking for retirement homes. The main challenge is finding a sustainable solution to the affordable housing crisis in an environment where new construction is lagging, and large investment funds are crowding out many first-time buyers.”
As home prices trended upward in March, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) jointly reported today that new residential sales in April 2021 were at a seasonally-adjusted annual rate of 863,000, 5.9% below the revised March rate of 917,000, but 48.3% above the April 2020 estimate of 582,000. The median sales price of new houses sold in April 2021 was $372,400, while the average sales price was $435,400.
“In April, nearly two in five homes sold were not yet started, compared to just over one in five sold at this stage of construction last year,” said Realtor.com Chief Economist Danielle Hale. “With high expectations among existing-home sellers and competitive conditions for homebuyers that include fast-selling homes, record high prices, and limited choices for sale, shoppers are increasingly turning to new homes as an alternative, and not just for high-end homes.”
As noted, the low number of homes available can be attributed to a spike in the cost of materials, as well as a depletion in the number of skilled workers available.
“We interpret today’s release to be additional evidence that material prices and a lack of labor and lots are holding back sales,” said Doug Duncan, Chief Economist at Fannie Mae. “While total sales fell over the month, homes sold-but-not-yet-started jumped by 16.5% to the highest level since 2006. Similarly, while homes for sale at the end of the month rose by 3.9%, the increase was driven almost entirely by homes where building had yet to begin. This growing construction backlog, combined with another strong rise in the median home sales price (up 20.0% from a year earlier), suggests to us that demand for new homes remains strong, but homebuilders are struggling to keep up.”