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PNC Senior Economist Abbey Omodunbi: House Prices Accelerate at Record Pace in May;

Michigan Business Network
July 28, 2021 10:00 AM

pncfsg CroppedHouse Price Growth Will Slow in the Remainder of the Year
  • The S&P CoreLogic Case-Shiller U.S. national home price index leaped 16.6% in May from one year earlier; the fastest pace on record.
  • The S&P CoreLogic Case-Shiller 20-City home price index jumped 17.0% in May from one year earlier; all 20 cities saw double-digit year-over-year gains.
  • PNC’s baseline forecast calls for a slowing in house price growth in the remainder of the year.

The not seasonally adjusted S&P CoreLogic Case-Shiller U.S. national home index rose a record-high 16.6% in May from one year earlier, up from the previous record-high 14.9% growth in April. May marks the twelfth straight month of faster year-over-year price gains. The S&P CoreLogic Case-Shiller 20-City index rose 1.81% in May from the prior month; prices were up from the prior month in all 20 cities. The strongest gains from the prior month were in Phoenix (up 3.5%), Tampa (up 2.7%), and Las Vegas (up 2.6%).

The S&P CoreLogic Case-Shiller home price indices are repeat-sales indices that track the three-month moving averages of single-family house prices in the U.S. House prices were 17.0% higher on a year-ago basis in 20 U.S. cities. Phoenix (25.9%), San Diego (24.7%), and Seattle (23.4%) had the strongest gains from the prior year while Cleveland (13.6%), Minneapolis (12.8%), and Chicago (11.1%) had the weakest gains. Charlotte, Cleveland, Dallas, Denver, and Seattle all recorded their highest year-over-year gains.

House prices have increased at a double-digit pace in every month since December 2020 as low mortgage rates and the increasing prevalence of remote work have driven housing demand. Longstanding supply-side constraints have also driven prices higher as homebuilders have been faced with higher construction material costs. Despite the extraordinary increase in house prices in May, the housing market has shown signs of cooling in recent months.

New-home sales declined from a downwardly revised 724,000 annualized units in May to 676,000 in June. The inventory of existing homes for sale has risen for four straight months, indicating softening demand. The number of building permits, a leading indicator of housing activity, has decreased in four of the last five months. PNC’s baseline forecast calls for the housing market to settle through the rest of this year. Higher prices and gradually rising mortgage rates will discourage some potential buyers and encourage some current homeowners to put their homes up for sale, increasing supply.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

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Michigan Business Network is an online broadcasting company that provides knowledge, news, and insights into Michigan’s businesses, industries, and economy.