Several housing reports came out last week, giving us a good feel for how the market is fairing in this very abnormal environment.
The Federal Housing Finance Agency’s Home Price Index rose by 1.4% for the month of March and was up an annualized and very hot 13.9%. This index measures single family home appreciation across the country. Since this index only encompasses those single-family homes purchased with conforming limit mortgages, it tends to run slighter hotter than the other appreciation reports since it focuses on the part of the market with the most demand.
The US Census Bureau’s New Home Sales report came in slightly lighter for April, down 5.9%. This drop represents an annual rate of 863,000 units, down from the previous month’s 917,000 units. Shortages of labor, lumber and other raw materials are making it very difficult for builders to efficiently construct new homes, which is causing longer turn times on construction projects and higher pricing. The median new home price increased by 20.1% from a year ago to $372,400. With these numbers, we are currently at a 4.4 month supply of homes, where a healthy supply is considered around six to seven months.
Lastly, the National Association of Realtors released their Pending Home Sales report, which was for the month of April, and it showed that signed contracts on existing homes decreased by 4.4%. Year over year they were up 51%, but this is compared to the beginning of the pandemic when signed contracts hit a record-low, so the number is a bit skewed. Summing it up, we see that the demand for homes is not slowing down, and we need more homes to sop up that demand. Due to the low levels of inventory and high levels of demand, home appreciation can start to get too hot and become non-sustainable so we need more homes to hit the market.