House Price Growth Will Likely Cool in 2021

• The S&P CoreLogic Case-Shiller U.S. national home price index jumped 13.2% in March from one year earlier; the fastest pace since late 2005.
• The S&P CoreLogic Case-Shiller 20-City home price index accelerated 13.3% in March from one year earlier; 19 out of 20 cities saw double-digit year-over-year gains.
• The housing market remains red-hot as strong demand outpaces very tight supply.

The not seasonally adjusted S&P CoreLogic Case-Shiller U.S. national home index leaped 13.2% in March from one year earlier, the fastest pace since December 2005 and down from the upwardly revised 12.0% growth in February. The S&P CoreLogic Case-Shiller 20-City index accelerated 1.6% in March 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 3.1%), Seattle (up 2.9%), and San Diego (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 13.3% higher on a year-ago basis in 20 U.S. cities, the fastest pace since late 2013. Phoenix (20.0%), San Diego (19.1%), and Seattle (18.3%) had the strongest gains from the prior year while Minneapolis (11.0%), Las Vegas (10.6%), and Chicago (9.0%) had the weakest gains. 

House prices have increased at a double-digit pace for four straight months as strong demand outpaces very tight supply. March marks the tenth straight month of accelerating house price growth. Demand has been supported by very low mortgage rates, remote work, and a growing demographic of potential homebuyers. Longstanding supply challenges have been exacerbated by rising construction material costs which reduces builders’ profit margins. However, homebuilders still have a very strong outlook for housing. The NAHB housing market index remained at 83 in May, close to the all-time high of 90 it reached in November. Supply constraints should ease in the second half of the year as the pandemic subsides and sellers feel more comfortable showing their homes. Construction activity should remain solid in 2021 and house price growth will likely be lower than realized in 2020.

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