Home prices across the US catapulted by the most on records dating back 33 years, significantly outpacing expectations and further fuelling concerns that inflation is anything but transitory.
According to the latest S&P CoreLogic Case-Shiller index reading, home prices across the country skyrocketed by a staggering 16.61% year-over-year in May, marking the sharpest increase in the index’s 30-plus year history. To think that all this time we thought April’s 14.8% price increases were astonishing…
With that in mind, the 20 largest cities in the US reported price gains of 16.99% compared to year-ago levels, nearly reaching the record 17.09% pace that was noted in July 2004. Similarly, the 10-city composite annual increase stood at 16.4% in May, up form 14.5% in the month before. Some of the largest year-over-year price increases for housing was noted in Phoenix, San Diego, and Seattle, which price growth of 25.9%, 24.7%, and 23.4%, respectively.
“A month ago, I described April’s performance as ‘truly extraordinary,’ and this month I find myself running out of superlatives,” S&P DJI managing director and global head of index investment strategy Craig Lazzara told CNBC. “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.”
Indeed, demand for housing continues to remain robust, as historically-low interest rates have kept millennials, the largest demographic, transitioning into homeownership. However, with housing prices this high, an increasing number of potential homebuyers are being squeezed out of the market.
Looking ahead, though, the latest data from the US Census Bureau shows that home sales in June plummeted sharply, as construction costs and ongoing supply chain disruptions have done little to boost homebuilding activity, and instead have sent those with constrained incomes running for cover. Moreover, to further add to the plethora of headaches for the US real estate market, raging wildfires across the west coast of Canada and the US threaten to send lumber prices even higher… still transitory, Mr. Powell?
Information for this briefing was found via Case Shiller and CNBC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.