Crazy US Housing Prices... Biggest Surge in 34 Years

April Housing Index Rises 14.6%
Fed Tapering Controversy Expected
Analysis Suggests Inflation Peak Passed Amid Declining Expected Inflation Rate

[Asia Economy New York=Correspondent Baek Jong-min] U.S. home prices in April rose by as much as 14.6% compared to a year ago. This is the largest surge in 34 years since statistics began. Amid evaluations calling it an "unprecedented surge," controversy over the Federal Reserve's (Fed) tapering of asset purchases is expected to intensify.

[Image source=AP Yonhap News]

The April S&P CoreLogic Case-Shiller National Home Price Index, released on the 29th (local time), rose 14.6%. This is a larger increase compared to the 13.3% rise in the previous month.

Home prices in 20 major cities rose even more sharply, recording a 14.9% increase. This exceeded market experts' forecast of a 14.5% rise. By city, San Diego and Seattle showed increases of over 20%. Phoenix's increase reached 22.3%. Due to zero interest rates, mortgage rates have fallen, and with increased housing demand outpacing supply, home prices continue to rise without pause.

As competition for home purchases intensifies, most homeowners are selling their homes to buyers who offer prices higher than the asking price. Some homeowners are demanding down payments close to 30%, making it difficult for buyers lacking cash. Earlier, on the 22nd, the National Association of Realtors (NAR) revealed that the median price of existing home sales in May surpassed $350,000 for the first time, reaching $350,300.

The rise in home prices further increases the likelihood of Fed tapering. A day earlier, the Wall Street Journal (WSJ) reported that the Fed is preparing a two-step tapering process, first reducing purchases of mortgage-backed securities (MBS) worth $40 billion per month, followed by a reduction in $80 billion of Treasury purchases.

Despite the overheating housing market, on the other hand, there is analysis suggesting that fears of U.S. inflation have peaked. CNBC reported that the expected inflation rate, measured by the difference between yields on 10-year U.S. Treasury bonds and Treasury Inflation-Protected Securities (TIPS), fell to 2.33%, while the 5-year expected inflation rate was actually higher at 2.45%. This indicates that long-term inflation expectations are actually declining.

Thomas Barkin, President of the Richmond Federal Reserve Bank, also said, "I am relieved by the decline in expected inflation rates reflected in the market."

This content was produced with the assistance of AI translation services.