Economic Report: Home prices rise at fastest pace since 2005, as housing grows more expensive in every part of the country

United States

The numbers: Home price gains continue to accelerate, reflecting the significant imbalance between the supply and demand for housing across the U.S.

The index of home prices across 20 large cities increased at yearly pace of 13.3% in March, according to the S&P CoreLogic Case-Shiller home price index. On a monthly basis, home prices were up 1.6%.

“The market’s strength is broadly-based: all 20 cities rose, and all 20 gained more in the 12 months ended in March than they had gained in the 12 months ended in February,” Craig J. Lazzara, managing director and global head of index investment strategy at S&P DJI, said in the report.

The separate national index, which measures home prices across the country, displayed a similar 13.2% gain over the past year, which equates to the highest annual gain since December 2005.

What happened: Among the 20 cities that the index tracks, Phoenix again saw the largest increase with a 20% jump, followed by San Diego (up 19.1%) and Seattle (up 18.3%).

Separately, the Federal Housing Finance Agency released its quarterly house price index, which showed that home prices were up 12.6% over the past year as of the first quarter.

“House price growth over the prior year clocked in at more than twice the rate of growth observed in the first quarter of 2020, just before the effects of the pandemic were felt in housing markets,” Lynn Fisher, deputy director of FHFA’s division of research and statistics, said in the report. “In March, rates of appreciation continued to climb, exceeding 15 percent over the year in the Pacific, Mountain and New England census divisions.”

The big picture: Rising home prices aren’t in themselves a new phenomenon caused by the pandemic — as the FHFA’s report notes, home prices have increased every quarter since September 2011. But the size of the increases is certainly influenced in part by the pandemic.

Many Americans poured into the housing market in search of larger homes, particularly in the suburbs. With many company shifting to remote working arrangements on a more permanent basis because of the pandemic, workers could stand to live further from major city centers without facing long daily commutes.

The pandemic-related trend magnified demographic shifts already in motion. Millennials are aging into the time of life where people most often buy their first homes. Unfortunately, the supply of housing is severely constrained, in large part because of years of under-building that followed the Great Recession. Experts have warned it will take years for home builders to construct enough homes to meet Americans’ needs, meaning that high home prices may be here to stay.

What they’re saying: “The main challenge is finding a sustainable solution to the affordable housing crisis in an environment where new construction is lagging, and large investment funds are crowding out many first-time buyers,” said George Ratiu, senior economist at

“Soaring house prices may be turning off some potential buyers, with existing home sales falling in three straight months,” said Sal Guatieri, senior economist at BMO Capital Markets, in a research note.

“The rise in home prices seems like an old story at this point. But the increases are happening across the board. It doesn’t matter if it’s at the upper end or the bottom tier,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets, in a research note.