News & Insights

Housing Prices, S&P Earnings Up; Consumer Sentiment Down

The Real Price of Housing Up 18.8% in Face of Pandemic, Supply Chain Constraints

Over the past 12 months, the Case-Shiller U.S. National Home Price Index has risen by 18.8%, the biggest jump in its history, contributing to the inflation shock we’re currently experiencing. Because of the way the Consumer Price Index (CPI) factors in changes in housing value, the increases in owner-equivalent rent and rental costs will continue to contribute to inflation. Rental prices, as measured by the Zillow Observed Rental Index (ZORI), initially fell during the first months of the pandemic but have since recovered and now exceed pre-pandemic levels. As leases renew, this growth in rental rates will make their way into CPI numbers, a process that can take a year or more. 

The pandemic brought on a surge of migration to the suburbs, prompted by a desire for additional living and work-from-home space coupled with the hope that lower density living environments meant lower infection rates. The supply of available homes dried up fairly quickly, and building new homes ran into supply constraints as costs rose because of materials shortages and lack of available labor. A decade of underinvestment following the housing crisis of 2007-08 also worsened the supply problem.