Despite Economic Shutdown in April, U.S. Case-Shiller Index Maintained Momentum

As the housing market came to a standstill, April’s annual home price growth increased to 4.7%

By Selma Hepp Housing Affordability, Real Estate

Home price growth remained remarkably steady even as the country hit its peak of the coronavirus (COVID-19) pandemic in April, tumbling the economy into a recession. At 4.7% year-over-year growth, the national Case-Shiller Index reported the highest 12-month gain since December 2018—continuing the nine consecutive months of steady increases. The month-to-month increase of 1.01% is the fastest pace since April 2018.

Despite challenges during stay-at-home orders and virtual standstill in housing markets across the country, the continuous, steady price growth reflects the strength of home buyer demand. Demand has also been bolstered by another historical decline in mortgage interest rates, with the 30-year fixed rate mortgage at the lowest levels seen since spring of 2013, falling even lower after April. Decline in mortgage rates since the onset of COVID-19 has been a meaningful contributor to housing affordability and underpinned the recent positive housing market trend. Favorable demographics, particularly millennials reaching the home-buying age, has been a tailwind supporting the housing market coming into the pandemic—but has also driven the pent-up demand since.

While the 10- and 20-city composite indexes both continued to experience similar growth, the 20-city index, which covers some of the smaller metro areas where housing demand has been particularly strong this year, experienced stronger acceleration in April. 

Figure 1: 10- And 20-City Home Price Growth Returned to Late 2018 Levels

Phoenix, one of the areas included in the 20-city S&P CoreLogic Case-Shiller Indexes, maintained the highest growth rate in home prices for the 11th consecutive month with an increase accelerating to 8.8% compared to last April. Seattle continued to follow in second place, showing growth acceleration at 7.3% year over year. Minneapolis (up 6.4%) and Cleveland (up 6%) followed in third and fourth place, outpacing Charlotte, North Carolina, and Tampa, Florida, which were in third and fourth place in March.

Figure 2: Annual Home Price Growth Accelerated in Seattle

The regions where the 12-month home price continues to lag are New York (2.5%) and Chicago (1.4%), though New York’s growth pace picked up in April compared to the month before.

The region with the largest price growth acceleration since March is Minneapolis, with price growth increasing by a full percentage point from 5.3% last month to 6.4% in April. Cleveland saw similar acceleration. In contrast, the regions with weakening home price growth include San Francisco (down 1.0 percentage points), Portland, Oregon, (down 0.6 percentage points) and Boston (down 0.5 percentage points). These declines may reflect the impact of the pandemic.

Figure 3: Monthly Home Price Growth Varied Across Metro Areas

Recent high frequency data on housing activity since April suggests some of the harder-hit areas may experience a slower rebound and different home price growth than areas where the housing market has almost gone unscathed. Nevertheless, most regions continue to experience a shortage of homes for sale which has supported price growth even amid the pandemic.

With many millennials buying their first homes and largely driving demand, price growth among homes in the lower one-third of the price distribution is accelerating at a faster rate—up 7.08% on average, compared to the average growth of 5.45% among second-tier prices and 3.91% among highest-tier prices.

Phoenix home price growth in lowest price tier (up 10.84%) continues to lead among all reported metro areas, but Tampa, Florida, (up 10.78%) and Seattle (up 10.67%) followed closely. The three regions also experienced a quickening of price growth in middle price tiers, all up about 8% year over year.

Moving forward, upcoming data may show some slowing in home sales and home price growth in areas where recent outbreaks of the virus are unfolding, despite demand initially remaining solid and consistent.

*Due to the COVID-19 crisis, S&P Dow Jones Indices and CoreLogic are unable to generate a valid April 2020, update of the Detroit S&P CoreLogic Case-Shiller indices for the June release; thus, Detroit was excluded from the analysis.

 © 2020 CoreLogic, Inc., All rights reserved.