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Case Shiller: Home Prices Rise at Fastest Pace Since 2005

Sammamish Mortgage
Published:
March 29, 2012
Last updated:
June 2, 2021
Case Schiller Index Update
In This Article

March readings for S&P CoreLogic Case-Shiller Home Price Indices rose to their highest level since 2005 in March. National home prices rose by 13.20 percent year-over-year as compared to February’s reading of 12.00 percent growth.

The Case-Shiller 20-City Home Price Index reported average year-over-year home price gains of 13.30 percent in March. Phoenix, Arizona continued to lead the 20-City Index with a year-over-year home price growth of 20 percent. San Diego, California followed with home price growth of 19.10 percent; Seattle, Washington reported year-over-year home price growth of 18.30 percent.

How the Covid Pandemic Impacted  Home Prices

Real estate pros said that the Covid epidemic continued to impact housing markets as homeowners were more willing to list their homes as Covid cases decreased. Demand for single-family homes increased as homebuyers shopped for larger homes in less-congested metro areas.

The pandemic opened more opportunities for working from home, which increased buyer interest in larger homes with amenities including home offices.

According to the Federal Housing Finance Agency, home prices for single-family homes owned or financed by Fannie Mae and Freddie Mac rose by 12.60 percent from the first quarter of 2020 through the first quarter of 2021.

As Covid cases fall more Americans will either return to their workplaces or re-evaluate their employment and housing situations.

Demand for homes will exceed the supply of available homes for the foreseeable future, but the current high demand for homes may soften as families return to work and school and covid-related fears ease.

Home Price Growth May Slow, but Prices Unlikely to Drop

Rapid home price growth is likely to slow as more home sellers and buyers enter the market in the aftermath of the pandemic. Analysts don’t see major dips in home prices as demand continues to exceed supplies of new and previously-owned homes.

Homebuilders face ongoing obstacles including labor shortages and rapidly rising materials prices that impact their ability to provide enough homes to meet demand.

Affordable homes are in short supply as pre-owned homes are often subject to bidding wars and cash sales due to buyer competition for fewer available homes.

First-time and moderate-income buyers are joined on the sidelines by buyers who depend on mortgages to buy homes; they typically can’t compete with cash sales.

As real estate markets return to pre-pandemic conditions, home prices may gradually plateau, but there isn’t much relief in sight for homebuyers needing to finance their home purchases.

Low Mortgage Rates

Today, mortgage rates are near historic lows, with rates having actually dipped to their lowest-ever level several times over the past year.

With mortgage interest rates as low as they are now (2.95% for a 30-year fixed mortgage as of the time of this writing on June 2, 2021), competition for housing is high. This is even more true because of the current tight inventory situation. Inventory is short all across the country and is especially tight in certain parts, including the Northwest.

Bidding wars are on the rise once again, which will have a direct impact on price increases throughout the remainder of 2021.

Right now, the average home price in the US is $281,370. According to Zillow, that’s an 11.6% increase from the same time last year. According to Zillow, the housing market across the country is still “very hot” right now.

Mortgage rates have dipped over the past few months and are expected to remain extremely low, which may help boost sales over the coming months. Experts anticipate the 30-year fixed-rate mortgage rate to remain around 3% throughout the remainder of the year.

A Word About Case-Shiller Index Flaws

It should be noted, however, that the Case-Shiller Index has some shortcomings. For instance, the index is based on changes in home prices of a single home through successive sales. This means that to calculate its home price index, the Case-Shiller searches for sales of the same home over a period of time and calculates the difference in contract price.

This methodology can distort the home price tracker downward during times of weak economy because there is no distinction made for homes sold in foreclosure or as a short sale.

Another distortion in the Case-Shiller Index is that the model neglects all home types that are not of type “single-family residence.” This means that multi-unit homes and condominiums are excluded from the Case-Shiller Index model.

In some markets, such as Chicago and New York City, condominiums account for a large percentage of overall sales.

Lastly, the Case-Shiller Index is published with a “lag,” which renders it useless to buyers and sellers of Bellevue in search of real-time, relevant data. The most recent Case-Shiller Index is published with a 60-day delay, so the report issued in August only covers home sales through June.

In 2019, job growth has averaged 165,000 per month. Data that’s two months old does little to help us today.

Making sound real estate decisions is about having timely, relevant data at-hand when it’s needed. The Case-Shiller Index fails in that respect. It’s good for highlighting the U.S. housing market on the whole, as it existed in the past. For real-time market data, though, you’ll want to talk with an active real estate agent.

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Have Questions About Mortgages?

Do you have questions about mortgages that you want answered? Sammamish Mortgage can help. We are a local, family-owned company based in Bellevue, Washington. We serve the entire Pacific Northwest region, including Washington, Oregon, Colorado, and Idaho. We offer a wide variety of mortgage programs and products with flexible qualification criteria.  Please contact us if you have mortgage-related questions.

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