E Economics

US Housing Prices Kept Booming Amid Tight Inventory

28 April, 2021
housing prices

In February, a measure of US housing prices in 20 cities rose at the fastest pace since March 2014, boosted by low mortgage rates and tight inventory. As I expected, on a YoY basis, the S&P CoreLogic Case-Shiller index (20-City Composite) rose 11.94% in February (up from 11.12% in January). Looking at the details, CNBC noted “The cities with the largest gains continue to be Phoenix, San Diego and Seattle. Prices in Phoenix gained 17.4% year over year, followed by San Diego with a 17% increase and Seattle with a 15.4% increase. Nineteen of the 20 cities reported stronger price gains in the year ended February 2021 versus the year ended January.” In the meantime, the S&P CoreLogic Case-Shiller index of national property values climbed 11.97% YoY, the biggest jump since February 2006. The increase followed a 11.22% gain in January.

This trend was confirmed by other indexes. As a matter of fact, the CoreLogic House Price Index for February grew by 10.43% YoY (up from 9.69% YoY in January). It was the fastest increase since April 2006. In addition, the FHFA (Federal Housing Finance Agency) purchase-only price index rose 12.2 percent YoY in February (the largest increase on record and up from 12.0 YoY percent in January).

According to my proxies, US housing prices will keep strenghtening in the short term — with S&P CoreLogic Case-Shiller index (20-City Composite) probably increasing by ~13% YoY in March — amid strong fundamentals:

→ Mobility will improve as more states are expected to ease Covid-19 restrictions in the coming months
→ Demand for second homes has been strong amid pandemic
→ President Joe Biden extended the foreclosure moratorium and mortgage forbearance through the end of June, which would therefore limit inventory and downward prices pressure
→ Housing supply remains constrained, hitting another record low in March