April home prices hit record highs, despite rising mortgage rates and supply

Home prices reached new highs in April despite rising mortgage rates and a rise in the supply of available homes. Normally, prices would fall under such conditions, but today’s housing market is unlike any other in recent memory.

The S&P CoreLogic Case-Shiller National Home Price Index reported a 6.3% increase in April compared to the previous year. It is the second consecutive month that the national index has risen at least 1% over its prior all-time high.

Although this is a three-month moving average, it’s worth noting that those price increases occurred even though the average 30-year fixed mortgage rate rose dramatically in April, from 6.9% to 7.5%, according to Mortgage News Daily.

“2024 is closely tracking the strong start observed last year, where March and April posted the largest rise seen before a slowdown in the summer and fall,” said Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, in a news release. “Heading into summer, the market is at an all-time high, once again testing its resilience against the historically more active time of the year.”

The only potential sign of respite is that the price index’s yearly and monthly growth are decreasing slightly. March’s annual increase was 6.5%.

Nonetheless, it contributes to one of the least affordable housing markets in US history for homeownership and renting.

According to new research from Harvard’s Joint Center for Housing Studies, the cost of housing has reached a record high.

According to the survey, home prices have increased by 47% since early 2020, with the typical sale price being five times the median household income.

For renters, even if rent growth is slowing due to a large rise in new apartment units this year, prices are still 26% higher than in 2020 and rising in three out of five markets.

HJCH considers half of all renter households, or more than 22 million, to be “cost burdened” since they spent more than 30% of their income on housing. Twelve million of these households pay more than half of their income for rent.

Prices continue to be supported by a supply-demand imbalance. Housing supply was already low when the COVID-19 epidemic struck since homebuilders had yet to recover from the 2008 financial crisis. Then, a pandemic-induced rush on houses caused supply to fall to record lows for several years.

“The rapid and sudden increase in mortgage rates in April pushed housing affordability further out of reach for many potential buyers, while some who could still afford it held back,” Zillow’s senior economist Orphe Divounguy said in a statement. “

As a result, the percentage of listings with price cuts increased to 22.4% in April, the highest rate in six years and a significant increase from 17.2% the previous year.”

However, he added that, despite the relative decrease in April sales, well-priced properties sold in just 13 days, three days slower than April 2023.

In May, stockpiles reached a 3.7-month supply. A six-month supply represents a balanced market between buyer and seller.