Home Prices Rise Faster Than Expected, Hitting New Record High

Home prices broke the prior month’s all-time record high, setting a new record high for the second month in a row in April, the S&P CoreLogic Case-Shiller Indices showed Tuesday.

The closely watched 20-city index, which tracks home prices in the largest metropolitan areas, rose by 1.4 percent before seasonal adjustment and 0.4 percent after adjusting for seasonality.

Home sales typically pick up in the spring and summer months, often pushing up prices, so the seasonal adjustments downplay the month-t0-month gains.

Compared with a year ago, the 20-city index is up 7.2 percent, outpacing overall inflation and putting homes out of reach for many Americans already squeezed by rapidly rising prices.

The highest year-over-year gain in home prices was in San Diego, where prices are up 10.3 percent. New York and Chicago fill out the top three, with gains of 9.4 percent and 8.7 percent. Portland is at the bottom of the list, with just a 1.7 percent gain over the previous 12-months.

The national home price index rose 1.2 percent before seasonal adjustments and 0.3 percent adjusted. The 10-city index, covering the biggest cities and surrounding areas, rose 1.4 percent before seasonal adjustment and 0.5 percent after.

Compared with a year ago, the national index was up 6.3 percent and the 10-city index was up

The Federal Reserve began hiking interest rates in the spring of 2022, sending mortgage rates to their highest levels in 30 years. Ordinarily, high mortgage rates weigh on home prices but this cycle has seen home prices rising rapidly despite high and rising rates. The primary reason for that seems to be that many homeowners a reluctant to sell their current homes because that would entail trading a low priced mortgage for a higher priced mortgage, resulting in a low supply of existing homes for sale.

This has made the Fed’s campaign to bring down inflation harder because it has pushed up shelter prices. The main inflation indexes do not include home prices directly because home purchases are considered investments rather than consumption. But rising home prices tend to push up rents and a measure called owners-equivalent of rent that does go into the inflation equivalent.

In April, the average rate for a 30-year fixed mortgage was 6.99 percent, the highest monthly average since November.