Today’s U.S. March home price reports revealed a tenth consecutive month of outsized increases, as the S&P Case Shiller index rose 2.2% to mark the largest gain since May of 2013, while the FHFA home price index rose 1.4%. The S&P measure hasn’t declined since January of 2019, while the FHFA measure hasn’t fallen since May of 2020.
The home sales and construction data have climbed by less than expected into Q2, thanks to labor shortages and elevated construction costs that have capped affordability, leaving a big gap between supply and demand despite the modest Q1 climb in mortgage rates. The result is a huge climb in home prices that will likely continue until we face a better supply-demand balance in 2022.
- The S&P Case-Shiller home price index rose 2.2% in March to leave a 13.3% y/y gain.
- The FHFA home price index rose 1.4% in March to leave a 13.9% y/y gain.
The S&P Case-Shiller
The S&P Case-Shiller home price index surged 2.2% to 251.6 in March for the 20-City measure, beating forecasts and leaving the largest gain since May of 2013, following February’s 1.3% increase to 246.2 (was 246.0). On a 12-month basis, the index posted a 13.3% y/y gain, versus a 12.0% (was 11.9%) y/y rise previously. This is the fastest pace of appreciation since the 13.4% y/y rate in December of 2013. Prices have been on the rise (y/y) since June 2012.
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The March 10-City index increased 2.0% to 264.8, after February’s 1.2% gain to 259.6 (was 259.5). The 12-month clip rose to a 12.8% growth pace from the 11.7% y/y pop previously.
Once again, all 20 cities in the index registered 12-month gains with 1 of them at double digits, led by Phoenix (20.0% y/y) and San Diego (19.1% y/y), while Chicago brought up the rear (9.0% y/y).
The FHFA Home Price Index
The FHFA home price index rose by a hefty 1.4% to 324.9 in March, after February’s 1.1% increase to 320.3 (was 319.7). Prices are up 13.9% y/y, versus 12.4% y/y (was 12.2%) in February. This home price index has risen by at least 0.9% in each of the past ten months, and prices have risen for 39 consecutive quarters. The index has posted monthly gains since January of 2012, with the exception of a small dip last May. For Q1, house prices are up 12.6% y/y, and are up 3.5% versus Q4 2020.
All of the nine census divisions covered posted gains on the month, led by the Mountain (2.2%) and New England (1.9%). Also, the Mountain division has led in annual growth for 14 quarters.
The housing market is quite illiquid relative to financial markets, and much of the volume in the market is skewed to the spring home sales season. As such, we will see a more efficient “price discovery” process through Q2 that should reveal big price gains as home transactions close.