House prices rose in April at the fastest rate on record

• Home prices soared 14.6% year-over-year in April as the nationwide supply shortage intensified.
• The jump is the largest since the S&P CoreLogic Case-Shiller index began tracking data in 1987.
• Home prices have surged through 2021 as builders struggle to catch up with unprecedented demand.
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Another month, another acceleration in US home inflation.

Home prices throughout the US surged 14.6% from year-ago levels, according to the S&P CoreLogic Case-Shiller home price index. The reading marks a pick-up from the 13.3% rate seen in March and the fastest pace of price growth since data collection began in 1987. Economists surveyed by Bloomberg held a median estimate for a year-over-year jump of 14.7%.

Phoenix posted the largest one-year jump of 22.3%, according to a Tuesday press release. San Diego and Seattle followed close behind, with respective gains of 21.6% and 20.2%. Chicago registered the smallest gain, with home prices climbing 9.9% from April 2020.

Price growth accelerated broadly through April. All 20 cities included in the national index saw price growth land in the top quartile of historical performance. Charlotte, Cleveland, Dallas, Denver, and Seattle all notched their highest 12-month gains in history.

The US housing market has been on an absolute tear through 2021. Record-low mortgage rates and outsize demand drove sales sharply higher early in the pandemic. The buying spree quickly morphed into a price surge as Americans snapped up what little inventory existed before the health crisis. With buyers still clamoring for homes and supply only just rebounding, home inflation has spiked to highs not seen in modern history.

“This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years,” Craig Lazzara, global head of index investment strategy at S&P Dow Jones Indices, said in a statement. “Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing.”

Other indicators signal contractors aren’t likely to balance the market anytime soon. Housing starts rose just 3.6% in May, missing the economist forecast and offsetting just some of the prior month’s 12.1% slide. Building permits – which act as a more forward-looking indicator for residential construction – tumbled 3% to the lowest level since October.

The construction shortfall is likely to keep price growth elevated in the near term. Decades of inadequate homebuilding have left the country with a shortfall of up to 6.8 million units, according to a June report from the National Association of Homebuilders. Contractors would need to reach an annual construction pace of 2 million units to fill the gap in 10 years. But with starts sitting at just an annualized rate of just 1.57 million as of May, price pressures are set to linger well into the economic recovery.