US home prices jumped almost 20% in July to another record high, the S&P Dow Jones Indices’ housing price index showed on Tuesday, as concerns that the Federal Reserve might raise interest rates in the not too distant future spurred more buyers into an already overcrowded market.
“July 2021 is the fourth consecutive month in which the growth rate of housing prices set a record,” Craig Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI, said in a statement accompanying the data.
The S&P DJI data, however, lagged behind numbers from the National Association of Realtors which suggested that sales of existing homes in the United States fell 2% in August as buyers retreated from an overpriced market.
Regardless of the difference between the two sets of numbers, dire housing shortages in the United States since the financial crisis of 2008 and last year’s coronavirus outbreak have pushed up existing home prices beyond the means of many Americans.
“We have previously suggested that the strength in the U.S. housing market is being driven in part by a reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes,” Lazzara of S&P DJI said. “July’s data are consistent with this hypothesis. This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing.”
The Commerce Department said on Tuesday that US housing starts grew more than 17% in the year to August while permits issued for new construction also rose double-digits, signaling efforts by builders to put up more homes in a supply-starved market.