— This is the script of CNBC's news report for China's CCTV on May 26, 2021, Wednesday.
Recent figures released by different institutions and departments show how heated the housing market has been in the United States. The S&P CoreLogic Case-Shiller Indices, a measure closely watched, reported a 13.2% annual gain in March, the highest since December 2005 and one among the biggest in about 30 years. All 20 cities reported price increases in March. Phoenix saw the strongest gain with a 20% price increase, followed by San Diego with a 19.1% increase and Seattle saw prices gone up by 18.3%.
Also on Tuesday, the Commerce Department said the median price of a new home sold in April was $372,400, about 2.38 million Chinese Yuan, up 20.1% from a year earlier. This is the strongest annual gain since 1988, according to the Wall Street Journal. The median sales price for existing homes recorded an annual gain of 19.1% in April to $341,600, or 2.19 million Chinese Yuan, the National Association of Realtors reported last week.
There are several reasons behind the price increase. On top of the low-interest rate and rising costs of construction materials, the fact that more people are willing to purchase homes in urban areas under the pandemic also boosts the demand. And on the supply side, housing inventory is sitting close to record low due to safety controls and construction delays. According to NAR, only 1.16 million homes were on the market in April, 20% less than a year ago.
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"It's now just a new record in real terms. Home prices have never been so high. And my data goes back over 100 years. So this is something now we naturally look at the Federal Reserve as a source of stabilization… But I don't think that the whole thing is explained by Central Bank policy. There's something about the sociology of markets that's happening. And then there's the question of whether they can stabilize it without causing it to crash. That's hard to do."
The factors driving the real estate market will stay for the time being. Two-thirds of analysts surveyed by Reuters expect the price to continue to head higher in 2021, adding risks to the economy.