U.S. Home-Price Growth Surges as Demand Overwhelms Supply

Also on Tuesday, the Commerce Department said the median price of a new home sold in April was $372,400, up 20.1% from a year earlier, the strongest annual gain since 1988.

The median sales price for existing homes rose 19.1% in April to $341,600, the National Association of Realtors said last week.

Robust homebuying demand, driven by ultra-low mortgage interest rates, and a shortage of homes for sale have pushed prices rapidly higher in recent months. There were 1.07 million existing homes on the market at the end of March, down 28.2% from a year earlier, according to NAR.

There are early indications that lack of inventory is causing home sales to ease. April marked the third straight month-over-month decline in existing home sales, the longest downward stretch since last spring.

But economists expect the supply-demand imbalance to continue driving prices up. Fast-rising home prices and the limited inventory are making homeownership less attainable for first-time buyers or those with limited budgets.

About 27% of new homes sold in April were priced under $300,000, according to the Commerce Department, down from 45% of sales a year earlier. The proportion is the lowest on record in data going back to 2002, according to the National Association of Home Builders.

While home builders have increased their construction pace, it could take years to shrink the nationwide deficit of houses, economists say. Builders are facing rising materials costs and shortages of ready-to-build land and skilled labor, limiting how quickly they can ramp up production.

Sales of newly built homes fell 5.9% in April from March to a seasonally adjusted annual rate of 863,000, the Commerce Department said Tuesday. The rate was 48.3% higher than in April 2020.

Troy Charlton of Century 21 Charlton Realty Co. in Nashville, Tenn., said more of his clients are choosing to buy new homes because it is so difficult to compete for an existing home in the current market. Many builders are limiting the number of homes they sell each month, but buyers are willing to wait, he said.

“At least you know you’re in line,” he said. “It’s just more of a guaranteed ‘One day I’m going to own a home’ kind of thing, versus the ‘Every weekend let’s go take a shot and see where we land.’ ”

The Case-Shiller 10-city index gained 12.8% over the year ended in March, compared with a 11.7% increase in February. The 20-city index rose 13.3%, after an annual gain of 12% in February. Price growth accelerated in all 20 cities.

Economists surveyed by The Wall Street Journal expected the 20-city index to gain 12.4%.

Phoenix had the fastest home-price growth in the country for the 22nd straight month, at 20%, followed by San Diego at 19.1%.

A separate measure of home-price growth by the Federal Housing Finance Agency, also released Tuesday, found a 13.9% increase in home prices in March from a year earlier, a record in data going back to 1991.

Write to Nicole Friedman at [email protected]