Home prices hit another record in April, even as mortgage rates rose and the supply of homes for sale increased. Typically under these conditions, prices weaken, but today's housing market is unlike any other in modern history.
Prices in April rose 6.3% compared to the same month a year earlier, according to the S&P CoreLogic Case-Shiller National Home Price Index. This is the second month in a row that the national index has jumped at least 1% from its previous all-time high.
Although this is a three-month moving average, it is important to note that these rate gains come even as the average rate on a 30-year fixed mortgage rose sharply in April, from 6.9% to 7.5%, according to Mortgage News Daily.
“2024 closely tracks the strong start seen last year, with March and April posting the largest rise seen before slowing in the summer and fall,” said Brian Locke, head of commodities, real and digital assets at S&P Dow Jones Indices. In a press release. “With summer approaching, the market has reached all-time highs and is once again testing its resilience in the face of the historically busiest time of year.”
The only possible sign of relief is that the annual and monthly gains on the price index are slowing slightly. Annual gains for March were 6.5%.
However, it is fueling what is now considered one of the least affordable housing markets in U.S. history for both home ownership and rental. The housing cost burden has reached a record high, according to a new report from the Harvard Joint Center for Housing Studies.
According to the study, home prices are now 47% higher than they were in early 2020, with the median sale price now five times the median household income.
For renters, although rent growth has slowed due to the surge in new residential units this year, prices are still 26% higher than in 2020 and rising in three out of five markets.
Half of renter households – more than 22 million – spent more than 30% of their income on housing, which HJCH considers “cost burdened”. 12 million of those families spend more than half their income on rent.
For homeowners, $20 million is a cost saddled with their monthly payments.
All of these cost-laden levels represent records.
Homeowners are also facing a sharp increase in insurance premiums, with an average increase of 21% between 2022 and 2023, according to the HJCH report, and property taxes are also rising.
Prices remain supported by the imbalance in supply and demand. Housing supply was already low before the Covid pandemic, because homebuilders had not yet recovered from the financial crisis in 2008. Then there was a rush on housing purchases due to the pandemic, which reduced supply to record levels for several years. Home builders couldn't keep up.
Supply is now rising, with an 11% increase in new listings in April compared to March, according to Zillow, and a 16% increase as of April 2023. That has put total inventory for sale up 18% year over year. While this may seem like a lot, the supply is still very weak, especially compared to the strong demand.
“The rapid and sudden increase in mortgage rates in April pushed housing affordability beyond the reach of many potential buyers, while some who were still unable to afford it,” Orvi DeVonge, chief economist at Zillow, said in a press release. “They retreat.” “As a result, the share of listings with price cuts rose to 22.4% in April, the highest April rate in the past six years, and a big step up from 17.2% the year before.”
But despite the relative slowdown in April sales, well-priced homes sold in just 13 days, just three days slower than in April 2023, he added.
In May, inventory rose to a 3.7-month supply level. A six-month supply is considered a balanced market between buyer and seller.
