Home prices in the U.S. achieved a record high in June, as revealed by the S&P Case-Shiller Index data. The continued rise in home prices is largely attributed to the strong demand and tight supply in the housing market. The pandemic has intensified the demand for residential properties and driven up the pace of home sales.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index reported a 18.6% annual gain in June, up from a 16.8% increase in May. This is the highest reading in more than 30 years of data. The 10-City Composite annual increase came in at 18.5%, up from 16.6% in the previous month. The 20-City Composite posted an 19.1% year-over-year gain, an increase from the 17% in May.
Phoenix, San Diego and Seattle reported the highest year-over-year gains among the 20 cities in June. Phoenix led the way with a 29.3% year-over-year price increase, followed by San Diego with a 27.1% increase, and Seattle with a 25% increase.
The demand is largely driven by historically low mortgage rates that have allowed many people to afford homes. Additionally, during the pandemic, people were also looking for more spacious accommodation to accommodate remote work and schooling.
However, this rapid surge could have harmful implications for the economy, as potential homebuyers are priced out of the market, exacerbating income and wealth inequality. Despite the surge in prices, the sale of homes has started to slow down, indicating the possibility of a market cooldown. Experts suggest that a gradual increase in mortgage rates and more houses on the market would help in rebalancing the market.