Annual Home Price Increase Hits 15-Year High

Annual home prices climbed briskly in March, according to the S&P CoreLogic Case-Shiller US National Home Price NSA Index

The S&P National Composite Index, covering all nine U.S. Census Divisions, marked its tenth consecutive month of accelerating prices with a 13.2% gain from year-ago levels, up from 12.0% in February.

This increase was last exceeded 15 years ago in December 2005, “and lies very comfortably in the top decile of historical performance,” Craig J. Lazzara, managing director and global head of Index Investment Strategy at S&P DJI, says in prepared remarks.  

For the 20-City Composites, up 13.3% in March year-over-year, all 20 cities gained, and all gained more in the 12 months ended in March than they had gained in the 12 months ended in February.

In the 20, Phoenix, San Diego, and Seattle reported the highest year-over-year gains with Phoenix leading the way with a 20.0% year-over-year price increase, followed by San Diego with a 19.1% increase and Seattle with a 18.3% increase.

Phoenix held the top spot for the 20th consecutive month. Although prices were strongest in the West (+15.1%) and Southwest (+14.8%), every region logged double-digit gains.”

“These data are consistent with the hypothesis that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” Lazzara says. “This demand may represent buyers who accelerated purchases that would have happened anyway over the next several years. Alternatively, there may have been a secular change in preferences, leading to a permanent shift in the demand curve for housing.”

This thinking is inline with previous speculation by Lazzara. Last November, he predicted increases in the September, August and July in the Housing Indices could presage future strength, as COVID encourages potential buyers to move from urban apartments to suburban homes.

The private sector, as well, has hardly missed the strength of the housing market, nor the accompanying challenges it poses. 

Jeff Frankel, president of Tri Pointe Homes’ Bay Area division, has told GlobeSt.com he expects continued strong sales and price appreciation in most markets, which will result in low inventories:

“The year will not be without its challenges. Builders must manage COVID-19-related issues, including supply chain adjustments, labor shortages and municipality delays. For buyers, the main challenge, again, will be lack of supply.”