Home price growth in the U.S. soared to new highs in July.
Standard & Poor’s said Tuesday that its S&P CoreLogic Case-Shiller national home price index posted a 19.7% annual gain in July, up from 18.7% in June — the fourth straight month in which the growth rate set a record. The 20-City Composite posted a 19.9% annual gain, up from 19.1% a month earlier. The 20-City results were just shy of analysts’ expectations of a 20% annual gain, according to Bloomberg consensus estimates.
“The National Composite Index marked its fourteenth consecutive month of accelerating prices with a 19.7% gain from year-ago levels, up from 18.7% in June and 16.9% in May,” said Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, in a press statement. “The last several months have been extraordinary not only in the level of price gains, but in the consistency of gains across the country.”
In July, all 20 cities recorded home price increases. Home prices in 19 of the 20 cities are now at all-time highs. Only Chicago is an outlier, at 0.3% its 2006 peak.
“Phoenix’s 32.4% increase led all cities for the 26th consecutive month, with San Diego (+27.8%) and Seattle (+25.5%) not far behind,” said Lazzara.
"It's surprising the timing of this," Robert Shiller, Yale University professor of economics, told Yahoo Finance Live Tuesday afternoon, referring to the boom in home prices during the COVID-19 pandemic. "It came starting in a recession, a very brief recession. We're supposed to be depressed and yet we seem to be exuberant in the market."
“Today’s S&P Case-Shiller Index reflects the competitive nature of the 2021 summer housing market, with interested buyers including everyone from families looking for homes in anticipation of an in-person back-to-school season to buyers seeking larger homes in desirable suburban markets,” said George Ratiu, manager of economic research at Realtor.com, in a statement prior to the results. “With inventory remaining tight, prices advanced at a strong double-digit rate in July. In addition, the average mortgage rate for a 30-year loan dropped from 2.98% at the start of July to 2.80% by the end of the month, adding fuel to eager buyers’ ability to bid up prices.”
The lack of homes for sale continues to drive prices up. According to the National Association of Realtors, total housing inventory at the end of August was 1.29 million units, down 1.5% from July’s supply and down 13.4% from one year ago. At the current sales pace, unsold inventory sits at a 2.6-month supply, unchanged from July but down from 3.0 months in August 2020.
Prices are likely to head north through the end of the summer. The median existing-home price for all housing types in August was $356,700, up 14.9% from August 2020, as prices increased in all four regions of the U.S., the NAR reported last week. But there might be some relief as inventory is beginning to come back on the market. Lawrence Yun, NAR’s chief economist, said last month the decline in inventory is slowing down and expects the number of homes for sale to pick up by year-end.
But the “continued high buyer demand has even outstripped the improvements in the supply of for-sale homes from the all-time lows experienced in the spring. Going forward, while there are indicators suggesting buyer pullback, it is still not enough to subdue home price growth before fall,” said CoreLogic Deputy Chief Economist Selma Hepp in a press statement prior to the results.
While homeownership is still the American dream, according to a recent LendingTree survey, 54% of renters who want to own a home say they don’t because they can’t afford a down payment and 36% said home prices are too high where they live. According to the NAR, first-time homebuyers represented just 29% of sales in the month, the lowest level since January 2019.
Amanda Fung is an editor at Yahoo Finance.