Housing prices across the country just keep going up.
In April, home prices rose 14.6% year over year, according to the S&P CoreLogic Case-Shiller National Home Price Index.
“April’s performance was truly extraordinary,” said Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. “The 14.6% gain in the National Composite is literally the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data.
Among the 20 major cities surveyed, Phoenix, San Diego, and Seattle showed the biggest price jumps above levels at this time last year.
- Phoenix: Housing prices increased 22.3%
- San Diego: Housing prices increased 21.6%
- Seattle: Housing prices increased 20.6
“Housing prices accelerated their surge in April 2021,” said Lazzara. “The National Composite Index marked its eleventh consecutive month of accelerating prices.”
All 20 cities in the index showed increases over prior years. Seattle, along with Charlotte, Cleveland, Dallas, and Denver reported the highest one-year increase in the history of the National Composite survey.
Lazarra noted previous research that suggested strength in the housing market had been driven in the wake of the coronavirus pandemic as buyers moved from cities to suburbia. “April’s data continue to be consistent with this hypothesis,” he said. “This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years.”
Overall, prices were strongest in the West and Southwest. On average, housing prices increased 17.2% in the West and 16.9% in the Southwest. However, every region posted double-digit increases.
In some cities, it’s led to bidding wars for available properties with listings staying on the markets for hours rather than days or months. Some buyers are bidding at above-market prices, offering cash, and waiving inspections and contingencies to close deals.
Rising prices are pushing some potential buyers out of the market. While sales activity at the high end of the market continues to be robust, activity is falling at the lower end.
Are we headed towards another housing bubble? Taylor Marr, Lead Economist for Redfin, said the current market doesn’t meet the definition of a bubble yet.
“Mortgage rates fell 88 basis points during this year as well from 3.62% in January 2020 to 2.74% in January 2021 per Freddie Mac,” Marr told Forbes. “This drop in mortgage rates almost completely offsets the rise in home prices according to a recent analysis by the Fed. Additionally, most households received stimulus checks and pulled back spending money on things like travel, eating out, and gyms during the pandemic and instead opted to spend more money on housing, which gave a short-term boost to prices as well.”
The Federal Reserve recently announced it would keep its benchmark interest rate near zero for now. While mortgage rates have risen slightly from their all-time lows, rates remain competitive.
Marrs says the fundamentals of the housing market are still structurally sound, unlike the crash that occurred in 2008 under the weight of subprime mortgages and unregulated markets.
“Current demographics are very favorable to a sustained housing boom,” Marrs said.