Home prices in March were 13.2% higher in March, compared with March 2020, according to the S&P CoreLogic Case-Shiller National Home Price Index.
That’s up from the 12% annual gain in February, and it marks the 10th straight month of accelerating home prices.
The March gain is the largest since December 2005 and is one of the largest in the index’s 30-year history. Prices are being pushed higher by incredibly strong competition in the market. High demand is butting up against near record-low supply, resulting in bidding wars for the vast majority of listings.
The 10-city composite rose 12.8% year over year, up from 11.7% in the previous month. The 20-city composite increased 13.3%, up from 12% in February.
Cities with the strongest price gains continue to be Phoenix, San Diego and Seattle. Phoenix sits at the top with 20% year-over-year price increase, followed by San Diego with a 19.1% increase and Seattle prices rising 18.3%. All 20 cities reported higher price increases in the year ending March 2021 versus the year ending February 2021.
“These data are consistent with the hypothesis that Covid has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI.
“This demand may represent buyers who accelerated purchases that would have happened anyway over the next several years. Alternatively, there may have been a secular change in preferences, leading to a permanent shift in the demand curve for housing,” he added.
Mortgage rates began rising during this period, with the average rate on the 30-year fixed just below 3% in February and then ending March at around 3.4%, according to Mortgage News Daily. Higher mortgage rates cut into purchasing power and usually put a chill on home prices, but clearly unusual competition in the market is overwhelming the usual mechanics of the market.
Only 1.16 million homes were on the market in April, a 20% drop year over year, according to the National Association of Realtors. The continued shortage of homes, especially at the lower end of the market, forecasts that home prices will not cool off any time soon.
Sales are beginning to weaken, and prices usually follow, but again, the usual trends are not dependable in this very unusual housing market.