Home-price gains continued in March

The pace of home-price appreciation again ramped up in March, even as the coronavirus pandemic hit the U.S., according to a major price barometer.

The S&P CoreLogic Case-Shiller 20-city price index posted a 3.9% year-over-year gain in March, up from 3.5% the previous month. On a monthly basis, the index increased 0.5% between February and March.

Because of the two-month lag in the data included in the price index, the effects of the coronavirus pandemic on the housing market were not yet fully reflected in the data.

Is this good news? As for where home prices will go because of the coronavirus pandemic, the jury is out. A report from Zillow ZG, 4.80% indicated that home prices could fall as much as 4% in a worst-case scenario because of the outbreak, while Fannie Mae FNMA, +4.58% has forecast home prices to continue rising in spite of the pandemic.

As buyers return to the market as the country rebounds from the pandemic, a limited inventory of homes for sale could fuel bidding wars and push prices higher.

What they’re saying: “While March was still early days, it’s looking likely that the initial impact will be felt mostly on plunging sales and listings volumes, not prices,” Robert Kavcic, senior economist at BMO Capital Markets, said in a research note.

Phoenix led the nation yet again with an 8.2 % annual price gain in March. However, what could be more notable is the city that came in second: Seattle.

Seattle experienced an annual rate of home-price appreciation of 6.9%, despite the fact that it was one of the first hot spots for the coronavirus outbreak in the U.S.

Overall, the pace of price growth increased in 17 of the 19 cities Case-Shiller analyzed — the 20-city didn’t include Detroit this month because transaction records for Wayne County, Mich., were unavailable, Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, said.

“March’s year-over-year gains were ahead of February’s, continuing a trend of gently accelerating home prices that began last autumn,” Lazzara said. “Housing prices have not yet registered any adverse effects from the governmental suppression of economic activity in response to the COVID-19 pandemic. As much of the U.S. economy remained shuttered in April, next month’s data may show a more noticeable impact.”

The big picture: The Federal Housing Finance Agency also released its quarterly home-price index, which showed that home prices rose 5.7% between the first quarters of 2019 and 2020. The state that displayed the most significant rate of appreciation was Idaho, where home prices have risen 12.6%, followed by Montana (up 10.2%) and Wyoming (up 9.9%).

Only two states saw declines in home prices during the first quarter, per the FHFA’s report: West Virginia, where home prices fell 2.1%, and Alaska, where prices dropped 0.1%.

“Leading up to the COVID-19 crisis, housing markets were tight and home prices appeared to be reaccelerating,” said Lynn Fisher, deputy director of the division of research and statistics at FHFA.

But both the FHFA and the Case-Shiller indexes have not displayed the true impact on the coronavirus pandemic on home prices, even though both reports capture activity in March.
The FHFA report, for instance, is based on closings through March 31 — but there’s a significant lag between contract signings and closings. As a result, March closings are reflecting prices set in January and February, before the effects of COVID-19 were felt in earnest across the U.S. Fisher further noted that FHFA report isn’t able “to account for any modifications or cancellations of sales later in March.”