Case-Shiller: Home Prices Way Up in March Due to Scarcity

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 6.5% annual gain for March, the same increase as the previous month. The 10-City Composite saw an increase of 8.2%, up from an 8.1% increase in the previous month. The 20-City Composite posted a slight year-over-year increase to 7.4%, up from a 7.3% increase in the previous month. 

“This month’s report boasts another all-time high,” said Brian D. Luke, head of commodities, real & digital assets at S&P Dow Jones Indices. “We’ve witnessed records repeatedly break in both stock and housing markets over the past year. Our National Index has reached new highs in six of the last 12 months. During that time, we’ve seen record stock market performance, with the S&P 500 hitting fresh all-time highs for 35 trading days in the past year.”

San Diego continued to report the highest year-over-year gain among the 20 cities this month with an 11.1% increase in March, followed by New York and Cleveland, with increases of 9.2% and 8.8%, respectively. Denver, which still holds the lowest rank after reporting three consecutive months of the smallest year-over-year growth, posted the same 2.1% annual increase in March as the previous month.

The U.S. National Index, the 20-City Composite and the 10-City Composite all continued their upward trend from last month, showing pre-seasonality adjustment increases of 1.3%, 1.6% and 1.6%, respectively.

After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 0.3%, while the 20-City and the 10-City Composite both reported month-over-month increases of 0.3% and 0.5%, respectively.

“The Index indicates the fastest year-over-year change since November 2022,” commented Bright MLS Chief Economist Dr. Lisa Sturtevant. “In several metros, home prices rose even faster. The fast pace of price growth suggests that higher-income buyers are still very active in the market. 

“Typically a local policy issue, housing has become an issue in this year’s Presidential election. High home prices and mortgage rates near 7% are increasingly pricing out young and moderate-income would-be homeowners. At the same time, some existing homeowners who have a very low mortgage rate and substantial housing equity feel stuck.  

“There has been a structural imbalance between demand and supply for decades. Estimates of the housing supply shortfall in the U.S. range from 1.5 million to 5.5 million housing units. The shortfall feels even more acute now as the large millennial population is squarely in its first-time homebuying years while baby boomers are staying in their homes longer. Homebuilding activity has ramped up, but the pace of new housing starts is not enough to remedy the housing deficit. Furthermore, the location of new housing construction activity is not always where the needs are greatest. 

“More so than in other Presidential election years, voters rank housing costs as one of their top issues. President Biden has offered both demand- and supply-side policy solutions to the housing affordability challenge. Candidate Trump has not put forth a detailed housing policy proposal but has focused more generally on bringing inflation down, which would lead to lower interest rates and could then spur more new housing construction.

“Home price growth will likely slow down this summer as mortgage rates remain high, sidelining some prospective homebuyers, while at the same time inventory will be increasing. However, the fundamental gap between demand and supply will remain. Even if Federal policies to increase supply are put into place, the effect will not be immediate. The result is that we are likely to be in a low supply environment through the Presidential election and probably into the next decade.”

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