A closely watched gauge of housing prices rose nearly 20 percent year over year in June, according to data released Tuesday, setting a new record high for the third consecutive month.
The S&P CoreLogic Case-Shiller U.S. National Home Price Index rose 18.6 percent in the 12 months leading into June, up from 16.8 percent in May and 14.8 percent in April. The index rose 2.2 percent month-over-month since June, 1.8 percent when seasonally adjusted.
“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 at S&P, in an analysis.
“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.
Housing prices have skyrocketed for more than a year after the onset of the coronavirus pandemic unleashed intense demand for homes. A combination of ultralow interest rates, the widespread adoption of teleworking and virtual education and higher household savings spurred a rally in both sales and prices through much of 2020.
While sales have fallen off slightly this summer, prices have continued to steam ahead as intense backlogs, supply shortages and the shadow of the lumber price spike offset slightly declining demand.
“This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing,” Lazzara said.
Prices had been rising steadily before the pandemic briefly interrupted the climb, and the recent acceleration has been a boon to those able to afford buying a house. But the rush has also locked out a growing number of potential homebuyers who lack the money to compete with all-cash offers and waived inspections from wealthier Americans.
A sharp increase in rents, which fell during the pandemic, is also squeezing renters and those struggling to save up for a home.
Rents increased 2.1 percent between July and August, according to Apartment List’s national rent index, and the median U.S. rent has increased 13.8 percent since the start of 2021. Rent growth from January to August averaged just 3.6 percent between 2017 and 2019.