Residential Housing Will Continue to Support Economic Growth in 2021

• The S&P CoreLogic Case-Shiller U.S. national home price index rose 14.6% in April from one year earlier; the fastest pace in over thirty years.
• The S&P CoreLogic Case-Shiller 20-City home price index rose 14.9% in April from one year earlier; 19 out of 20 cities saw double-digit year-over-year gains.
• Strong demand coupled with longstanding supply challenges have propelled house prices in the past year but house price growth should cool over the course of the year.

The not seasonally adjusted S&P CoreLogic Case-Shiller U.S. national home index jumped 14.6% in April from one year earlier, the fastest pace in over thirty years, up from an upwardly revised 13.3% growth in March. The S&P CoreLogic Case-Shiller 20-City index rose 1.6% in April from the prior month; house prices rose from the prior month in all 20 cities. The strongest gains from the prior month were in San Diego (up 3.0%), Phoenix (up 2.9%) and Dallas (up 2.4%).

The S&P CoreLogic Case-Shiller home price indices are repeat-sales indices which track the three-month moving averages of single-family house prices in the U.S. House prices were 14.9% higher on a year-ago basis in 20 U.S. cities. Phoenix (22.3%), San Diego (21.6%) and Seattle (20.2%) had the strongest gains from the prior year while Chicago (9.9%), Minneapolis (11.3%) and Atlanta (12.3%) had the weakest gains.

The U.S. housing market has been on a tear since the pandemic began as rock-bottom mortgage rates, strong consumer balance sheets and remote work propelled demand in a market with longstanding supply challenges. Homebuilding has improved in the past year but supply-chain disruptions and labor shortages (the construction sector had the second-highest number of job openings on record in April according to the Job Openings and Labor Turnover Survey) have contributed to slowing construction activity in recent months.

After increasing at a double-digit pace for five straight months, PNC’s baseline forecast calls for a cooldown in the housing market over the course of the year as supply improves, mortgage rates rise, and personal income growth slows. Moreover, housing will continue to contribute to economic growth this year as vaccinations increase and the economy reopens; residential investment is around 5% of GDP and consumption spending on housing services is about 12% of GDP.

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.