US house prices climbed 14.6% in April compared to a year earlier, the fastest rate of growth in more than 30 years.
It's a familiar story. The pandemic has accelerated demand for suburban homes, mortgage rates are at record lows. Meanwhile analysts believe sales that would have taken place anyway are being squeezed into a short period, cutting into supply and exacerbating rising prices.
There are early signs the demand and supply imbalance might be beginning to right itself. The US commerce department last week said the supply of new homes for sale rose by 15,000 in May to 330,000, up 5.8% from a year ago (see FT link above). That represented 5.1 months’ supply at the current sales pace, up from 3.6 months in January.
The proportion of borrowers more than four months behind on their mortgage payments has risen to three percent, prompting the Fed to introduce new protections in an attempt to slow foreclosures. On this point the US and UK markets diverge. Bank of England research published this week reveals the financial impact of the pandemic has largely been felt by renters.