The U.S. housing market is a stew of trends that has been building and boiling for the past several years. Historically low inventory and high competition are helping to push prices up at a steady but – for now – largely sustainable clip.
In March, prices climbed at a spicy 6.5 percent year-over-year, as expected. Case-Shiller’s® 10-city composite index rose 6.5 percent, while its 20-city composite climbed an even zestier 6.8 percent.
Seattle, Las Vegas and San Francisco reported the largest year-over-year gains among the 20 cities, at 13 percent, 12.4 percent and 11.3 percent respectively. The slowest annual gains came in Chicago (2.8 percent), Washington, D.C. (3 percent) and Cleveland (4.6 percent).
On a month-over-month, seasonally adjusted basis, prices grew 0.4 percent nationally and 0.4 percent for the 10-city and 0.5 percent for the 20-city composite indeces.
A generally strong economy and favorable demographic tailwinds driven by the huge millennial generation aging into their home-buying prime will help ensure that demand stays high, even as prices rise.
Getting a mortgage remains incredibly affordable compared to paying rent each month, but that advantage is starting to erode as mortgage interest rates rise alongside prices and income growth lags. This deteriorating affordability could begin to give some buyers pause and keep them renting longer, re-igniting an upward push in rents as the glut of new supply that came on line over the past few years leases up.
For several months now, it has felt as though any of these spices could cause the market to boil over, but for now the market seems content to remain at the same persistent simmer it has been maintaining instead. How long this recipe stays palatable is an open question.
Zillow predicts that for April, the S&P CoreLogic Case-Shiller U.S. national index will climb at a slightly faster annual clip of 6.6 percent year-over-year. Those results will not be released until June 26.
Note: Case-Shiller and Case-Shiller Index are registered trademarks of CoreLogic Solutions, LLC. The statements herein are not endorsed by or provided in association or connection with CoreLogic, LLC.