Home prices rise more than expected in March

Home prices rose more than expected in March, according to the S&P/Case-Shiller home price index.

Prices in 20 major cities rose 0.85% month-over-month and 5.43% year-over-year.

Economists had forecast that the 20-city index rose 0.75% month-on-month, according to Bloomberg. Compared to last year, they forecast a 5.11% rise.

The price gains for February were revised higher.

Prices rose the most in Portland, Seattle and Denver compared to last year.

“These cities also saw some of the largest declines in unemployment rates among the 20 cities included in the S&P/Case-Shiller Indices,” said David Blitzer, chairman of the index committee at S&P Down Jones Indices.

“The economy is supporting the price increases with improving labour markets, falling unemployment rates and extremely low mortgage rates.”

Additionally, tight supply in several markets is contributing to the rise in home prices. Blitzer noted that the number of homes on the market is less than 2% of the number of households in the US, the lowest since the the mid-1980s.

Still, there are expectations that the pace of price increases could start to slow soon.

“The underlying trend in home prices remains upwards, given the tightness of inventory, but it’s very likely that rising sales over the summer will be accompanied by reports of much smaller price gains or even modest declines,” said Pantheon Macroeconomics’ Ian Shepherdson in a note.

Data on new and existing home sales released last week signalled strong demand this spring selling season.

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