U.S. Home Prices Rise Amid Supply Shortage

Overview

In July, U.S. home prices continued to rise as the housing market grappled with a shortage of available listings. The S&P CoreLogic Case-Shiller 20-city house price index showed a 0.9% increase compared to the previous month, marking the fifth consecutive month of price growth. Nationally, home prices in the 20 major metro markets rose by 0.1% on a year-over-year basis. Meanwhile, the broader national index showed a 0.6% month-over-month increase in July and a 1% increase over the past year. Conversely, the Federal Housing Finance Agency reported an 0.8% rise in home prices from June to July, with New England experiencing the strongest price growth. The FHFA index saw a significant 4.6% increase over the last year.

Inventory Shortage Challenges Homebuyers

The persistent shortage of housing inventory has created challenges for homebuyers. High interest rates are discouraging homeowners from selling as they would likely face higher rates if they were to purchase another home. Consequently, buyers who are compelled to make a purchase are paying higher prices and facing intense competition due to the limited number of listings available.

Expert Insights from S&P

Craig J. Lazzara, Managing Director at S&P DJI, highlighted the continued rally of U.S. home prices in July 2023. He mentioned that the price increase since January has completely offset the earlier decline, resulting in a new all-time high for the National Composite. Lazzara also noted that the recovery in home prices is widespread.

Market Reaction

In early trading on Tuesday, stocks such as DJIA and SPX experienced an upward trend. The yield on the 10-year Treasury note (BX:TMUBMUSD10Y) surpassed the 4.5% mark.