Home prices hit another record in April, even as mortgage rates rose and the supply of homes for sale increased. Normally, under these conditions, prices would weaken, but today’s housing market is unlike any other in recent history.
Prices in April rose 6.3% compared to the previous month, according to the S&P CoreLogic Case-Shiller National Home Price Index. It’s the second month in a row that the national index jumped 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 gains come even as the average 30-year fixed mortgage rate rose sharply in April, from 6.9% to 7.5%. according to Mortgage News Daily.
“2024 closely follows the strong start seen last year, where March and April saw the biggest gains before slowing 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, once again testing its resilience against the historically most active time of year.”
The only possible sign of relief is that annual and monthly gains in the price index are slowing a bit. March annual gain was 6.5%.
However, it is fueling one of the least affordable housing markets in US history for both ownership and rental. The housing cost burden has hit a record high, according to a new report from Harvard’s Joint Center for Housing Studies.
Home prices are now 47% higher than they were at the start of 2020, with the median sale price now five times the median household income, the study found.
For renters, even though rent growth is slowing due to a large increase in new apartments this year, prices are still 26% higher than they were in 2020 and rising in three out of five markets.
Half of all renting households — more than 22 million — spent more than 30% of their income on housing, which is considered “cost-burdened” by HJCH. Twelve million of these households spend more than half of their income on rent.
For homeowners, 20 million is considered a cost borne by their monthly payments.
All these costing layers represent files.
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 a supply and demand imbalance. Housing supply was already low before the Covid pandemic hit because homebuilders had not yet recovered from the financial crisis of 2008. Then there was a pandemic-induced development in housing, causing supply to drop to lows record levels for several years. The builders could not keep up.
Supply is now on the rise, with an 11% increase in new listings in April from March, according to Zillow, and a 16% increase from April 2023. That pushed total for-sale inventory up 18% year-over-year. While that may sound like a lot, supply is still quite tight, especially compared to strong demand.
“The rapid and sudden increase in mortgage rates in April pushed housing affordability even further out of reach for many potential buyers, while some who could still afford it were held back,” Zillow senior economist Orphe Divounguy said in a statement. . “As a result, the share of imports with a price cut jumped to 22.4% in April, the highest for April in six years and a significant increase from 17.2% a year earlier.”
However, he added that despite a relative slowdown in sales in April, well-priced homes sold in just 13 days, just three days slower than in April 2023.
In May, inventories rose to a 3.7-month supply. A six-month offer is considered a balanced market between buyer and seller.
