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.
Home sales and construction figures have not risen as much as expected in Q2, due to labor shortages, and high construction costs which have limited affordability. This has left a large gap between supply and the demand despite a modest rise in mortgage rates during Q1. This will lead to a massive rise in home prices, which is likely to continue until 2022 when we have a better balance between supply and demand.
- The S&P Case-Shiller home price index rose 2.2% in March to leave a 13.3% y/y gain.
- The FHFA’s home price index increased by 1.4% to 13.9% year-on-year in March.
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). The index rose 13.3% year-over-year, up from a previous 12.0% y/y increase (was 11.9%). It is the fastest rate of growth since December 2013 when it was 13.4%. Since June 2012, prices have been rising (y/y).
The 10-City March index increased 2.0% to 264.8 after a February gain of 1.2% to 259.6. The 12-month growth rate jumped to 12.8% from 11.7% previously.
The index showed a 12-month gain in all 20 cities, including one at double-digits. Phoenix and San Diego were the leaders, while Chicago came last (9.0%).
The FHFA Home Price Index
The FHFA home price Index rose a massive 1.4% in March to 324.9, following a 1.1% rise to 320.3 (was 319.7) in February. Prices have risen 13.9% y/y versus 12.4% in February (was 12.2%). In the past 10 months, this index of home prices has increased by at least 0.9 percent. Prices have been rising for 39 straight quarters. Since January 2012, the index has shown monthly gains with only a slight dip in May last year. For Q1, prices of houses are up 12.6% on an annual basis and up 3.5% against Q4 2020.
Mountain (2.2%) and New England (1.9%) led the gains for the month. Mountain has also led the way in growth annually for 14 quarters.
The housing market has a low liquidity compared to other financial markets. A large part of the market volume is driven by spring sales. This will lead to a more efficient housing market. “price discovery” The end of the second quarter should see a significant increase in prices as transactions for home purchases close.