Home prices climb at record pace in February amid supply shortage: FHFA
- Home prices in the United States rose 12.2% year-over-year in February, the Federal Housing Finance Agency said.
- This is the fastest annual gain on record and represents a $ 35,000 jump in the median selling price of the home.
- Also in February, the S&P CoreLogic Case-Shiller Index experienced its largest price increase in a year since 2006.
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Owners, rejoice. Potential buyers, lament.
Home prices in the United States jumped 12.2% year-over-year in February, up 0.9 points from the previous month, the Federal Housing Finance Agency said on Tuesday. . This is the fastest price appreciation on record and an increase of $ 35,000 from the median home selling price just a year ago. The increase follows a one point gain in January.
Year-over-year price growth was strongest in the mountain region – which includes Wyoming, Colorado, Utah, Arizona and New Mexico – at 15.4%. Home inflation was lowest in the Northwest Central Division – which includes Iowa, Nebraska, Kansas and Missouri – at a still sizable 10.5%.
It is the latest data point showing a massive boom in the US real estate market, spurred at the start of the pandemic by low mortgage rates, as well as widespread migration from cities to suburbs. The S&P Case-Shiller House Price Index, for example, rose in February to a 12% year-over-year gain, according to a Tuesday release. This is the strongest reading for the index since 2006 and reflects price increases in the 20 metropolitan areas tracked by the index.
Meanwhile, CoreLogic’s own price index showed a 10.4% year-over-year price increase in February. It was also the biggest one-year rebound in the gauge since 2006.
But what started as months of strong sales growth has since collided with a record supply. Shortages across the United States have led homeowners to demand more for their homes, which has reduced affordability just as the U.S. economy recovers. In the latest sign of the market heat, Americans are now spending more on existing single-family homes than on new construction as they rush to grab all available units.
These pressures on inventories could soon be eased by a rebound in construction. Housing starts hit their highest level since 2006 in March as entrepreneurs rushed to close the gap between supply and demand. Building permits also increased last month.
Still, economists expect the housing market to continue to recover throughout the year, albeit at a more moderate pace. Demand for housing is expected to remain strong; nearly 9% of Americans plan to buy a home in the next six months, according to the Conference Board. That’s the highest share since 1987. And as mortgage rates, which recently fell below 3%, hover to historically low levels, a rebound in construction could give way to a more lasting market boom.
“With the improvement in supply from new construction and more houses likely being listed to capitalize on high house prices and vaccine availability, we are seeing house price appreciation slowing,” said the Jefferies economists in an April memo.