Home prices hit a new record in April despite rising mortgage rates and a growing supply of homes for sale. Normally, these circumstances would cause prices to fall, but today’s housing market is different from any in recent history.
Home prices rose 6.3% in April from a year earlier, according to the S&P CoreLogic Case-Shiller National Home Price Index, marking the second consecutive month that the national index has risen at least 1% from its all-time high.
While this is a three-month moving average, it’s important to note that these price increases occurred even as the average interest rate on a 30-year fixed mortgage jumped from 6.9% to 7.5% in April, according to Mortgage News Daily.
“2024 is largely in line with last year’s strong start, with March and April seeing record gains before slowing over the summer and fall,” Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, said in a news release. “As we head into the summer, markets are reaching all-time highs, once again testing their resilience to historically more active periods.”
The only encouraging sign is that the annual and monthly growth rates of the price index are beginning to slow slightly, rising 6.5% in March.
Still, it remains one of the most unaffordable housing markets in U.S. history, for both homeownership and renting. Housing costs are at a record high, according to a new report from the Joint Center for Housing Studies at Harvard University.
Home prices are now 47% higher than they were at the beginning of 2020, with the average sales price now five times the median household income, according to the study.
For renters, rent growth has slowed this year due to a strong increase in new apartment construction, but prices are still 26% higher than in 2020 and are increasing in three out of five markets.
Half of renter households (over 22 million) spend more than 30% of their income on housing costs, which the HJCH considers “cost-burdened.” Of those, 12 million spend more than half their income on rent.
For homeowners, that’s a cost that’s estimated to be $20 million in monthly payments.
All these cost burden levels represent a record.
Homeowners also face steep increases in insurance premiums, rising an average of 21% between 2022 and 2023, as well as rising property taxes, according to the HJCH report.
Home prices continue to be supported by an imbalance between supply and demand. Housing supply was already low before the pandemic, as homebuilders had yet to recover from the 2008 financial crisis. Then, the pandemic-induced rush to buy homes pushed supply to record lows for several years. Homebuilders were unable to respond.
Supply is currently on the rise, according to Zillow, with new listings in April up 11% from March and up 16% from April 2023. This has led to an 18% increase in total active inventory over the past year. While this may seem like a lot, supply is still fairly low, especially compared to the strong demand.
“April’s sharp increase in mortgage rates put homebuying further out of reach for many potential buyers, while holding off some who are still able to buy,” Orfée Divongi, senior economist at Zillow, said in a press release. “As a result, the share of listings that were reduced in price jumped to 22.4% in April, the highest for the month in six years and up from 17.2% a year ago.”
But despite the relative slowdown in sales in April, fair priced homes sold in just 13 days, just three days slower than April 2023, he added.
Inventory increased to 3.7 months in May. Six months of inventory is considered a balanced market between buyers and sellers.
