The increase in US home prices continued to accelerate in July, setting an annual record for the fourth straight month as strong demand and a dearth of available properties sent values soaring.
Home prices were up 19.7 per cent nationally compared with the same month last year, the biggest gain on record dating back to 1988, according to the S&P Corelogic Case-Shiller index. That surpassed the previous record set in June, when prices rose 18.7 per cent year on year.
“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 Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices.
Property values in 10 major markets grew 19.1 per cent versus a year ago, while the 20-city index jumped 19.9 per cent.
Seventeen of those 20 cities posted higher annual growth rates when compared to June. Home prices in all but one of those markets sit at all-time highs, with Chicago just 0.3 per cent below its peak.
The US housing market has been on fire for much of the pandemic, underpinned by low mortgage rates and buyers’ search for more space in the suburbs. Combined with tight supply, robust demand has rapidly pushed up prices.
“It is clear that the negative forces unleashed by labour market turmoil were substantially more than offset by the beneficial impact of record-low mortgage rates and the positive effect of increased demand for single-family homes from those leaving cities in search of more space,” said Joshua Shapiro, chief US economist at MFR.
However, the limited number of homes listed for sale, as well as record prices, have recently kept some buyers on the sidelines. The National Association of Realtors said last week that sales of previously owned homes fell 2 per cent in August against the previous month.
“Competition for the relatively few for-sale homes remains very stiff and home prices continue to rise sharply as a result. But the tight market conditions that have fuelled the skyrocketing prices are finally showing signs of loosening,” said Matthew Speakman, economist at the Zillow property information service.
Speakman added that inventory levels had increased for the fourth month in a row in August, and sellers “appear to be taking a less aggressive approach when putting their homes on the market”, with price cuts becoming more common.