According to S&P CoreLogic Case-Shiller National Home Price Index, home prices in the US witnessed the steepest surge ever in April 2021. The index rose to 14.6% in April from 13.3% in March, marking the highest annual rate of price growth since 1987.
This upsurge in home prices was observed due to an increase in mortgage rates, high demand, and a continued shortage of homes for sales.
The home-price surge is prevalent across the US and impacts sellers and buyers in big cities, small towns, and suburbs. Phoenix, San Diego, and Seattle saw the highest year-over-year gains, with more than 20% gain from the previous year.
In addition, Charlotte, Cleveland, Dallas, Denver, North Carolina, and Seattle reported their largest annual gains ever.
According to the National Association of Realtors, the median existing home sales price in May grew approximately 24% from the previous year.
The decline in home sales in recent months is driven by a lack of enough houses in the market. Rising prices have also discouraged buyers, and many builders have limited their sales to manage their costs and production rate.
However, some economists anticipate the rate of home price growth to decrease by the end of the year. The economists state that though the present rate of price gains is faster than during the housing boom in the early 2000s, this present market is less susceptible to a downturn.
The extremely low mortgage interest rates imply that the ordinary home buyers’ monthly payment has not increased quickly as the typical house price.
The fast-growing home prices and inadequate inventory are making it difficult for buyers with limited budgets. Though the sales activity is rising on the higher end of the market, it is falling on the low end as more buyers are priced out.