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U.S. home prices accelerated in March despite coronavirus pandemic

The latest S&P Corelogic Case Shiller home price index shows prices continued to rise in March, just as the pandemic was taking hold. Yahoo Finance’s Brian Sozzi and Alexis Christoforous break down the details with Craig Lazzarra, Managing Director at S&P Dow Jones Indices.

Video Transcript

ALEXIS CHRISTOFOROUS: We're getting a new snapshot of the housing market this morning. The latest S&P CoreLogic Case-Shiller Home Price Index shows prices continued to rise in March just as the pandemic was taking hold. Here to talk about it is Craig Lazzara, Managing Director at S&P Dow Jones Indices.

Craig, good to see you again. So what does this say about the state of housing right now?

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CRAIG LAZZARA: It says a couple of things. We begin to see in this report-- and this report covers transactions that closed in the month of March. We begin to see some impact from the COVID pandemic because we normally have a 20-city-- 20 city averages also reporting. We're unable to report for Detroit this month because Wayne county, Michigan, is more or less shut down. So you see some impact there.

That said, the strength in the market has surprised at least me. Prices were up year-over-year 4.4% from March 2019 to March 2020. We look at the same comparison number a month ago, prices were up 4.1%. So we see an accelerating trend, not a huge acceleration, but nonetheless, some acceleration over the course of the past several months.

The other thing that's remarkable about it is if you look at the 19 cities for which we did have good data, all 19 of them increased. 17 of the 19 increased at stronger rates March to March than they had done in February to February. So the market looks still stable, growing. And if you were looking for evidence of a pandemic, you would be hard to find it in the price data so far.

BRIAN SOZZI: Craig, why do you think that's the case? Why do you think the pandemic hasn't started depressing home values-- or home prices?

CRAIG LAZZARA: There are a couple of reasons, or three that I might mention. One is luck. Maybe it just hasn't turned up yet because remember these are transactions in the month of March. Some of them may have been in play before March-- well certainly, many of them would've been in play before March started and would have been negotiated prior to the worst of the pandemic.

And the shutdowns didn't really begin until mid-March. So April will be a better test in that sense. So that's-- luck and delay is one thing.

Counter to that are two factors. One is that mortgage rates are exceptionally low. I've refinanced my house three times in 15 years. And now I think you have to do it again because rates continue to plummet. So as rates go down, that means that houses, other things equal, are more affordable than they were otherwise. So that supports prices.

The second thing-- and this is hard to know on a short term basis, but I think could well be something we see over the longer run. The second-- the other thing to mention is that to the degree that the pandemic makes cities a less desirable place for people to reside-- because they're crowded, it's hard to practice social distancing, they're expensive, and all the reasons we know why New York and Chicago or the places like that are hard to shut down in a pandemic-- if that makes it more desirable for people to purchase houses out of center cities and seek-- in other words, going from renting in the city to buying outside, that may also be a support to prices. And I think it's too soon to say that's a definite trend yet. But it's certainly a definite possibility.

ALEXIS CHRISTOFOROUS: From the data you saw in this most recent report, Craig, which area is sort of strongest right now to sort of weather the storm if you do see a downturn now in May?

CRAIG LAZZARA: OK, I guess the strongest growth we saw this month of the 20 cities, or the 19 for which we had data, is in Phoenix, which continues a trend that's almost a year old now. Behind Phoenix was Seattle. Behind Seattle was Charlotte and Tampa. So basically, the West, especially the Southwest and the Southeast had been particularly strong.

The weakest cities in the report for the month of March-- and this is not really surprising-- were New York and Chicago, the ones that have probably suffered the most from the shutdown. So my guess would be-- and I hasten to say it is a guess. My guess would be that if we see real weakness next month, it's likely to be in the New York and Chicago metro areas rather than elsewhere, although, again, it's too soon to say for sure. But that would be my speculation.

ALEXIS CHRISTOFOROUS: All right. Craig Lazzara, Managing Director at S&P Dow Jones Indices, thanks for being with us this morning.

CRAIG LAZZARA: Thank you.