A real estate agent, right, gives a tour to potential home buyers during an open house in Manhattan Beach, California.
Patrick T. Fallon | Bloomberg | Getty Images
According to S&P CoreLogic Case-Shiller’s national property price index, property prices in March were 13.2% higher than in March 2020.
This is an increase from February’s annual profit of 12% and marks the 10th straight month that house prices have accelerated.
The March gain is the largest since December 2005 and one of the largest in the index’s 30-year history. Prices are being pushed up by the incredibly strong competition in the market. The high demand meets an almost record low supply, which leads to bidding wars for the vast majority of listings.
The 10-city network rose year-on-year by 12.8% after 11.7% in the previous month. The 20-city network rose by 13.3% compared to 12% in February.
Cities with the strongest prize-winning cities continue to be Phoenix, San Diego, and Seattle. Phoenix leads the way with a 20% year-over-year price increase, followed by San Diego, which is up 19.1%, and Seattle prices are up 18.3%. All 20 cities saw higher price increases in the fiscal year ending March 2021 than in 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.
“That demand could represent buyers who have sped up purchases that would have taken place over the next several years. Alternatively, there could have been a secular change in preferences that has permanently shifted the demand curve for housing,” he added.
During this period, mortgage rates began to rise. According to Mortgage News Daily, the median 30-year interest rate was just below 3% in February and then ended at around 3.4% in March. Higher mortgage rates affect purchasing power and usually have a negative impact on property prices. However, clearly unusual competition in the market overwhelms the usual mechanisms of the market.
According to the National Association of Realtors, there were just 1.16 million homes in the market in April, a 20% decrease from a year earlier. The ongoing shortage of home ownership, especially at the lower end of the market, predicts that property prices will not cool down anytime soon.
Sales are starting to weaken and prices usually follow, but again, the usual trends in this very unusual real estate market are not reliable.