If it seems like there’s a new “house prices just hit a record high” story every month, it’s because there is. But it isn’t just how high home prices are rising; it’s also about just how fast they are rising.
According to the latest data from the National Association of Realtors, home prices hit another record high in June. Beyond that, two of the most noted house price indices showed that house prices just rose by record-breaking amounts.
The latest S&P CoreLogic Case-Shiller Indices, arguably the gold standard of house price reports, showed that home prices rose by 16.6% from May 2020 to May 2021. That year-over-year increase is the highest in the 30-year history of the index.
“Housing price growth set a record for the second consecutive month in May 2021," said Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI.
“A month ago, I described April's performance as ‘truly extraordinary,’ and this month I find myself running out of superlatives,” Lazzara added. “The 16.6% gain is the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data.”
According to Lazzara, five major cities – Charlotte, Cleveland, Dallas, Denver, and Seattle – each set an all-time record in yearly price gains.
"We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes,” Lazzara said. “May's data continue to be consistent with this hypothesis.”
Lazzara notes that the “demand surge” for housing may be the result of people who were going to buy a house in the next few years expediting their homebuying plans in the wake of the pandemic, but also cautions that this shift in buyer behavior may be permanent.
The year-over-year price increase was even greater in the latest Federal Housing Finance Agency House Price Index, which showed that house prices rose by 18% from May 2020 to May 2021.
According to Lynn Fisher, FHFA’s Deputy Director of the Division of Research and Statistics, this trend is unlikely to slow down any time soon.
“House prices continued their record-setting growth into May," Fisher said. “This trend will likely continue around the country as busy summer homebuying months maintain the pressure being felt in already tight housing markets."