Home prices in 20 U.S. cities climbed more than forecast in March, driven by rising demand and a lack of inventory, according to S&P CoreLogic Case-Shiller data released Tuesday.
The 20-city property values index increased 6.8% year-over-year (the estimate was 6.5%), matching the year-over-year gain in February that was the largest since June 2014. The national home-price gauge climbed 6.5% year-over-year, matching February’s year-over-year advance that was the biggest since May 2014. The seasonally adjusted 20-city index rose 0.5% month-over-month (the estimate was 0.8%) after a 0.8% gain.
Cities posting the largest annual advances in March included Seattle, Las Vegas and San Francisco. Demand is being supported by the healthy labor market and borrowing costs that are still relatively low by historical standards. Nonetheless, 30-year fixed-rate mortgages have climbed to the highest since 2011. A persistent shortage of available properties will probably support further home-price appreciation, limiting the extent to which sales can pick up.
As property-price appreciation continues to outpace worker pay, it is proving a disadvantage for younger or first-time buyers even as it means rising homeowner equity for others.
“Months-supply, which combines inventory levels and sales, is currently at 3.8 months, lower than the levels of the 1990s, before the housing boom and bust,” David Blitzer, chairman of the S&P index committee, said in a statement. “Until inventories increase faster than sales, or the economy slows significantly, home prices are likely to continue rising.”
All 20 cities in the index showed year-over-year gains, led by a 13% increase in Seattle, a 12.4% advance in Las Vegas and an 11.3% pickup in San Francisco. After seasonal adjustment, Seattle, Las Vegas and Minneapolis had the biggest month-over-month increases at 1.3%. Home prices fell 0.2% in Cleveland from the prior month.