Home prices set another record in April, even as mortgage rates rose and the supply of homes for sale increased. Normally, prices would weaken under these conditions, but today's housing market is unlike any other in recent history.
According to the S&P CoreLogic Case-Shiller National Home Price Index, prices rose 6.3% in April compared to the same month a year earlier. It's the second month in a row that the national index has risen at least 1% from its previous all-time high.
While this is a three-month moving average, it's important to note that these price increases come even as the average 30-year mortgage rate rose sharply in April, from 6.9% to 7.5%. according to Mortgage News daily.
“2024 closely follows last year's strong start, with March and April seeing the biggest gains before a slowdown in the summer and fall,” said Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices. in a press release. “Heading into summer, the market is at an all-time high and is once again testing its resilience compared to the historically more active time of year.”
The only possible sign of relief is that annual and monthly gains in the price index are slowing a bit. The annual gain in March was 6.5%.
Yet it contributes to what is now one of the least affordable housing markets in U.S. history, both in terms of homeownership and rent. Housing costs have reached a record, according to a new report from Harvard's Joint Center for Housing Studies.
According to the research, house prices are now 47% higher than at the start of 2020, with the average sales price now five times the average household income.
For renters, even as rental growth slows due to a big increase in new apartments this year, prices are still 26% higher than in 2020 and rising in three out of five markets.
Half of all renter households – over 22 million – spent more than 30% of their income on housing, which HJCH considers 'cost pressure'. Twelve million of these households spend more than half of their income on rent.
For homeowners, 20 million euros is considered a cost arising from their monthly payments.
All of these chargeable levels represent records.
Homeowners are also facing a sharp increase in insurance premiums, averaging 21% between 2022 and 2023, according to the HJCH report, and property taxes are also rising.
Prices are still supported by an imbalance between supply and demand. Housing supply was already low before the Covid pandemic hit, as housebuilders had yet to recover from the 2008 financial crisis. Then there was a pandemic-induced run on housing, which sent supply down to record lows for years. Homebuilders couldn't keep up.
Supply is now rising, with an 11% increase in new listings in April compared to March, according to Zillow, and a 16% increase compared to April 2023. That pushed the total inventory for sale up year over year 18% up. While that seems like a lot, supply is still quite meager, especially compared to the strong demand.
“April's rapid and sudden rise in mortgage rates put housing affordability further out of reach for many potential buyers, while some who could still afford it remained reluctant,” Zillow's senior economist Orphe Divounguy said in a news release. “As a result, the share of listings with a price reduction in April skyrocketed to 22.4%, the highest percentage for April in the past six years, and a significant increase from 17.2% a year earlier.”
But he added that despite the relative slowdown in April sales, well-priced homes sold in just 13 days, just three days slower than April 2023.
In May, the stock rose to a 3.7-month supply. A six-month supply is considered a balanced market between buyer and seller.
