US home price growth surges at fastest rate in more than 30 years

Home price growth in the U.S. continued to heat up in June, setting a new record — yet again.

Standard & Poor’s said Tuesday that its S&P CoreLogic Case-Shiller national home price index posted a 18.6% annual gain in June, up from 16.8% in May — the highest rate in more than 30 years of data. It is the 13th consecutive month of accelerating prices and the third straight month in which the growth rate of housing prices set a record. The 20-City Composite posted a 19.1% annual gain, up from 17.1% a month earlier. The 20-City results far surpassed analysts’ expectations of a 18.6% annual gain, according to Bloomberg consensus estimates.

“The last several months have been extraordinary not only in the level of price gains, but in the consistency of gains across the country,” said Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, in a press statement. “In June, all 20 cities rose, and all 20 gained more in the 12 months ended in June than they had gained in the 12 months ended in May.”

In June, Boston joined Charlotte, Cleveland, Dallas, Denver, and Seattle in recording their all-time highest 12-month gains, according to the data. For the 25th straight month Phoenix led the 20-City Composite posting a 29.3% annual gain, with San Diego and Seattle right behind it posting a 27.1% and 25% year-over-year gain, respectively.

“Home prices in 19 of our 20 cities (all but Chicago) now stand at all-time highs, as do the National Composite and both the 20-City indices,” said Lazzara.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. June’s data are consistent with this hypothesis,” he added. “This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years.”

A slowdown is likely

Despite the upward record-setting trend, economists expect home price growth to decelerate as more inventory is expected to be introduced throughout the rest of the year. However, the shift is not reflected in the Case-Shiller data yet because the data lags current conditions and is a rolling three-month average. Last week, the National Association of Realtors (NAR) reported that the median existing-home price for all housing types in July was $359,900, up 17.8%, but a slowdown from the 20% to 29% price growth from a year ago.

“We’re pretty sure that the rate of increase of home prices is slowing, given the clear shift in median price data for existing home — after seasonal adjustments — but the softening is not yet visible in the Case-Shiller data,” said Pantheon Macroeconomics in a research note Wednesday morning prior to the results.

In July, there were more homes for sale than there were two or three months ago, said Lawrence Yun, chief economist at NAR, who expects inventory to continue to increase this year. The number of homes for sale at the end of July totaled 1.32 million units, up 7.3% from June’s supply.

“Despite some improvements to the availability of for-sale homes since winter’s inventory lows and spring’s mortgage rate increases, the housing market imbalances that propelled price growth to record highs persist. While some buyers are reaching their affordability ceiling and others are fatigued from making multiple offers, many enthusiastic buyers are still competing for limited inventories,” said CoreLogic Deputy Chief Economist Selma Hepp prior to the results.

Amanda Fung is an editor at Yahoo Finance.

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