The Case-Shiller Index shows home prices appreciating by 1.6% in April over previous month and up as much as 18% in the past year.

By Manuel Gutierrez, Consulting Economist to NKBA

Government releases over the past few months have confirmed what most of us already instinctively knew — the value of single-family homes has risen sharply over the past year. The selling prices for new as well as existing homes are between 17% and 18% higher than a year ago.

These price increases do not tell the full story, however, since change calculations are based on a comparison of different houses. Houses sold today are very likely different from the ones sold in the previous period, either because of different location or features, like size, number of rooms or amenities. In other words, it’s never an apples-to-apples comparison.

Another way is to look at home-price metrics that attempt to remove the impact of these characteristics. This is done by reviewing the selling price of the same house over time.

Home price appreciation is still mushrooming, up by 1.6% in latest Case-Shiller release.

Such methodologies are used by several organizations to arrive at house-price indices. The two best known for their reliable methodology are the Corelogic Case-Shiller Index and the Federal Housing Finance Agency’s House Price index.

Based on the Case-Shiller Index, the sales price of a home rose 1.6% nationally in April from March. Except for a dip earlier this year, home prices have risen at a faster rate each month since May 2020 (left panel of Figure 1.)

Prior to the pandemic, house prices had been relatively stable, rising an average of 0.5% a month, but the strong demand for houses post-pandemic broke that pattern, with monthly average increase of 1.1%.

On an annual basis, prices were 14.6% higher in April than a year ago. Along with the pattern of monthly price increases, the annual pace of change has also been increasing faster each month since May 2020. Prior to that, going back to 2012, house prices on average had increased 5.6% annually.

Unlike the price of single-family homes, condominium prices have had a much less rapid rise, except perhaps for the Los Angeles metropolitan area. But even there, shown by the black line in Figure 2, the 8.1% increase over the last year is smaller than the 14% jump for freestanding single-family homes in the city (Figure 3).

The smaller increase in condo prices reflects their declining appeal among many consumers since the pandemic hit the nation. Some consumers are less willing to live in the close proximity of a condominium, still concerned about the risk of being infected with COVID-19, but that fear should dissipate over time.

Condo price increases in the other four metro areas for which Case-Shiller provides estimates are significantly lower than in the Los Angeles metro (Figure 2). In fact, increases for San Francisco and New York are nearly negligible. This is a far cry from the pattern seen during the housing boom at the beginning of the 2000’s, when these two metros saw substantial price spikes for condominiums.

In contrast to the condo price experience, single-family homes in the 20 metro areas tracked by Case-Shiller have experienced increases in the low double-digits. The smallest of these has been in Chicago metro area, where prices are still up 10% from last year.

At the higher end, Phoenix, San Diego and Seattle are posting annual increases of at least 20% (Figure 3).

There is greater differentiation in house price inflation among states than in metro areas. The latest annual increase, for the year ended March 31, the price increases range from a high of 24% in Idaho and 19% in Utah, to a low of 5% in Hawaii and slightly higher 7% in both Louisiana and Wyoming.

Map 1 gives a quick visual overview of price increases by state.

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