Home prices hit a new high in April despite rising mortgage rates and an increased supply of homes for sale. Normally, prices would weaken in such situations, but today’s real estate market is unlike any other in recent history.
Prices rose 6.3% in April from a year earlier, according to the S&P CoreLogic Case-Shiller National Home Price Index. That marked the second month in a row that the national index was up at least 1% from its previous all-time high.
Although this is a three-month moving average, it’s worth noting that these price increases came despite a huge jump in the average 30-year fixed mortgage rate in April, from 6.9% to 7.5%. According to Mortgage News Daily.
Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, said: “2024 will closely follow last year’s strong start, which saw the largest economic declines in March and April before the summer and fall slowdown. Gains. “The market enters the summer at record highs, once again testing its resilience for the most historically active period of the year. “
The only sign of possible relief is a slight slowdown in annual and monthly gains in price indexes. The annual growth rate in March was 6.5%.
Still, it enters one of the most unaffordable housing markets for homeownership and rent in U.S. history. A new report from Harvard University’s Joint Center for Housing Studies shows that housing cost burdens have reached record highs.
Research shows that house prices are now 47% higher than at the start of 2020, with the median sales price being five times the median household income.
For renters, although rent growth has slowed due to a surge in new apartments this year, prices are still 26% higher than in 2020, with gains in three-fifths of the market.
Half of renter households (more than 22 million) spend more than 30% of their income on housing, which HJCH considers a “cost burden.” Twelve million of these households spend more than half their income on rent.
For homeowners, 20 million is considered a cost burden on monthly payments.
All of these cost burden levels are at record levels.
Homeowners are also facing steep increases in insurance premiums, averaging 21% between 2022 and 2023, and property taxes are also rising, the HJCH report shows.
The imbalance between supply and demand continues to support prices. Housing supply was already low before the COVID-19 pandemic as homebuilders had yet to recover from the 2008 financial crisis. Then the pandemic triggered a run on housing, sending supply to multi-year lows. Homebuilders can’t keep up.
Supply is currently increasing, with new listings in April up 11% from March and up 16% from April 2023, according to Zillow data. While that sounds like a lot, supply is still quite small, especially compared to strong demand.
“The rapid and sudden increase in mortgage rates in April made housing further unaffordable for many potential buyers, while holding back some who could still afford it,” Orphe Divounguy, senior economist at Zillow, said in a release. “As a result, the proportion of listings with reduced prices soared to 22.4% in April, the highest level in April in the past six years and a significant increase from 17.2% in the same period last year.”
But he added that despite a relative slowdown in sales in April, affordable homes sold in just 13 days, just three days slower than in April 2023.
In May, inventories rose to 3.7 months’ supply. A six-month supply is considered a balanced market between buyers and sellers.
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