Home prices surged to a new record high in August as the affordability crisis continues to deepen.
Prices increased 0.4% nationally in the period from July to August on a non-seasonally adjusted basis, the S&P CoreLogic Case-Shiller index showed Tuesday.
On an annual basis, prices are up 2.6% from their peak the same time last year. It marked the highest level for the index since 1987.
The 10-city composite, which encompasses Los Angeles, Miami and New York, rose 3% annually, compared with a 1% increase in July. The 20-city composite, which also tracks housing prices in Dallas and Seattle, jumped 2.2% in August, which is also higher than the 0.2% uptick recorded the previous month.
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There was a major discrepancy in the price gains in the 20 cities: Chicago saw a 5% annual gain, making it the best-performing city for the fourth straight month. New York, meanwhile, posted a 4.98% gain, followed by Detroit with an increase of 4.8%.
On the other end of the spectrum, cities in the West posted some of the biggest declines. Las Vegas home prices plummeted 4.9%, edging out Phoenix with its 3.9% decline.
“Regional differences are substantial,” said Craig Lazzara, managing director at S&P DJI, in a release.
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The Case-Shiller index reports with a two-month delay, meaning it may not capture the latest ongoings in the market.
The interest-rate-sensitive housing market entered a deep freeze last year in the wake of the Federal Reserve’s aggressive interest-rate hike campaign.
But prices have quickly recovered as buyers adjust to higher mortgage rates and compete for a limited supply of homes.
“Home prices remained strong through August, despite the high cost of a mortgage payment,” said Nicole Bachaud, Zillow senior economist. “But as August faded into the fall, we saw mortgage rates surpass 20-year highs. These stubbornly high mortgage rates are continuing to put pressure on affordability which is cooling the market as more buyers get pushed to the sidelines this fall.”
The affordability problem is unlikely to be resolved anytime soon.
With mortgage rates continuing to hover near the highest level in two decades, sellers who locked in a low rate before the pandemic began have been reluctant to sell, leaving few options for eager would-be buyers.
The number of available homes on the market at the end of July was down by more than 9% from the same time last year and down a stunning 46% from the typical amount before the COVID-19 pandemic began in early 2020, according to a recent report from Realtor.com.
“The year’s increase in mortgage rates has surely suppressed housing demand, but after years of very low rates, it seems to have suppressed supply even more,” Lazarra said. “Unless higher rates or other events lead to general economic weakness, the breadth and strength of this month’s report are consistent with an optimistic view of future results.”
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