Home prices in the United States jumped by the most in over seven years in March, as a growing number of eager buyers competed for a dwindling supply of housing stock.
“Prices have risen so rapidly because people are moving from apartments in cities to suburban homes,” Robert R. Johnson, professor of finance at Creighton University’s Heider College of Business, said in an emailed statement.
“While the rise in prices will undoubtedly moderate, the preference for suburban living will likely continue as more people work from home on both a full and part-time basis,” Johnson said. “I don’t believe that this was simply an acceleration of demand for homes that will normalize once the pandemic is over.”
“Home sales were down again in April from the prior month, as housing supply continues to fall short of demand,” said Lawrence Yun, NAR’s chief economist. “We'll see more inventory come to the market later this year as further COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes.”
The supply shortage has driven frenzied buyers to bid up the median existing-home price, which in April rose to $341,600, up 19.1 percent from April 2020 and a record high, the NAR said.
While all 20 cities in the Case-Shiller index reported higher year-over-year price increases in March compared to February, Phoenix, San Diego, and Seattle reported the biggest gains. Phoenix led the way in March with a 20 percent year-over-year price jump, followed by San Diego with a 19.1 percent increase, and Seattle with an 18.3 percent rise.
“The markets in Phoenix and San Diego continued to thrust upwards, as they have been doing since late spring 2020, reflecting a pandemic-driven shift in preferences towards less-urban housing options that provide more space for work, play, and year-round outdoor recreation,” said Austin Allison, CEO and co-founder of Pacaso, a platform to expand second home ownership, in a statement.
“House price growth over the prior year clocked in at more than twice the rate of growth observed in the first quarter of 2020, just before the effects of the pandemic were felt in housing markets,” said Lynn Fisher, deputy director of FHFA’s Division of Research and Statistics, in a statement.
“In March, rates of appreciation continued to climb, exceeding 15 percent over the year in the Pacific, Mountain and New England census divisions.”
Still, there are signs that the housing market may cool in the coming months, with the number of people signing contracts to buy homes dropping in May, and fewer people applying for mortgages.
“While both Fannie Mae and Freddie Mac are reducing their acquisitions of second home mortgages, which could raise the cost of borrowing for a second home, we don’t expect to see a significant effect on second-home markets. On the other hand, rising prices may soon begin to curb the demand for second homes,” Allison said.