US Economy: Home Prices Saw Record Rise In July Amid Housing Shortage

U.S. home prices saw a record rise in July due to high demand from buyers in a contracted housing market.

According to the S&P CoreLogic Case-Shiller 20-City Index, home prices showed a 19.7% annual gain in July, up from 18.7% in June. The smaller 10-City Composite also saw an increase in price by 19.1% from 18.5% only a month earlier.

The S&P CoreLogic Case-Shiller Home Price Indices are measures of residential real estate prices that track the change in value of these properties nationwide.

Cities in the West drove the gains seen in the 20-City Composite Index with Phoenix leading the way with a 32.4% year-over-year price increase, followed by San Diego with a 27.8% increase and Seattle with a 25.5% increase. Overall, S&P reports that 17 out of 20 cities posted higher price increases in the year up to July 2021 versus in June 2021.

The only outlier to this trend was Chicago, which fell slightly by 0.3% from its peak in 2006.

Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, said in a press release that the price rises seen in July are the "fourth consecutive month in which the growth rate of housing prices set a record." He added that home prices have been going up for the last 14 months and this is reflected in both indices.

“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. July’s data are consistent with this hypothesis,” said Lazzara.

There has been a nationwide housing shortage that began before the pandemic. It has been exacerbated by higher building costs and a shortage of workers.

Homebuilders’ sentiments were lifted somewhat after it was reported that the price of lumber, an important material for home construction, saw a massive drop. The persistently high prices though are making it difficult to afford a new home, but developers have accelerated their work to create new ones to fill this gap and increase supply.