Home prices rose by 4.7% annually in April, as the U.S. housing market continued to grow despite the coronavirus pandemic.
According to the S&P CoreLogic Case-Shiller National Home Price Index, prices also rose by 1.1% compared to March.
Data from the index fits with an emerging picture of recovering sales and resilient demand. But while this picture suggests the U.S. economy may be opening up, it’s mostly a product of rock-bottom mortgage rates and low supply.
The ongoing rise in home prices is the latest evidence that, as noted by S&P Dow Jones Indices’ Craig J. Lazzara, the pandemic is proving to be a blip on the U.S. housing market’s radar.
Lazzara said today:
April’s housing price data continue to be remarkably stable. The National Composite Index rose by 4.7% in April 2020, with comparable growth in the 10- and 20-City Composites (up 3.4% and 4.0%, respectively).
Likewise, the pandemic has done little to disturb trends that had begun several months earlier.
In all three cases, April’s year-over-year gains were ahead of March’s, continuing a trend of gently accelerating home prices that began last fall.
According to the report, Phoenix, AZ saw the greatest annual increase at 8.8%. The next highest came in Seattle, at 7.3%.
Interestingly, the latest release from S&P Dow Jones Indices fits with data published yesterday by the National Association of Realtors.
The NAR found that pending home sales increased by an astonishing 44.3% in May.
Likewise, the U.S. Census Bureau had previously found that new home sales increased by 16.6% in May compared to April. Encouragingly, the total number of sales – 676,000 – is 12.7% higher than the figure for May 2019.
Taken together, the data indicates that the U.S. housing market is heating up. As Craig Lazzara observed, many cities have hit all-time highs for prices:
The price trend that was in place pre-pandemic seems so far to be undisturbed, at least at the national level. Indeed, prices in 12 of the 20 cities in our survey were at an all-time high in April.
Nonetheless, rising home prices and sales don’t mean the U.S. can breathe a sigh of relief. The housing market is something of a freak in macroeconomic terms. It can thrive even when other economic indicators are depressed.
Take jobs. Unemployment claims are still worryingly high. Last week, U.S. residents submitted 1.48 million new claims. Meanwhile, continuing claims are hovering at the 19.5 million mark.
This is hardly the sign of a recovering economy, let alone a thriving one. Nonetheless, all-time low mortgage rates have managed to induce greater sales. In turn, they’ve helped contribute to higher prices.
At the same time, the U.S. housing market’s thin supply of houses is helping push home prices up even further. In January, Realtor.com reported that the supply of houses for sale in the U.S. hit the lowest level since it began recording data in 2012. And that was before the pandemic hit.
On top of this, a significant portion of house sales are attributable to Wall Street (and individual landlords building budding investment property empires). Between 2011 and 2017, for example, hedge funds spent a combined $36 billion on over 200,000 homes in America. Now, with the Fed’s “unlimited” quantitative easing in full swing, they must be in hog heaven.
In other words, don’t mistake rising home prices and sales for a genuine economic recovery. They’re mostly a sign of how climbing the property ladder is getting even more difficult for those of us at the bottom.
And that’s kind of depressing.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.