U.S. home prices surged 11% in August—the biggest annual increase in six years—as a wave of eager home buyers compete over scarce housing supply, according to new research Thursday from real estate firm Redfin.

The median home price last month hit $328,400, an increase of more than $32,000 compared to a year ago, according to the report—even as the workforce faces record levels of unemployment in the wake of Covid-19 lockdowns. There were 22% fewer homes for sale in August compared to a year ago, according to Redfin’s seasonally adjusted figures, a shortage that’s stoking competition and driving a strong seller’s market.

Home sales also picked up the pace last month, with more than 585,000 closings, a 10% increase over August 2019, according to Redfin’s seasonally adjusted data.

There was an even bigger surge in pending home sales, which soared 30% over last August, helped along by a modest uptick in new listings last month.

“The supply of homes is tighter than ever, and home prices are growing at the fastest rate in years,” said Taylor Marr, lead economist at Redfin, speculating that the higher prices could lure more sellers into the market.?

In the wake of the pandemic, home buyers have descended on suburban markets around the country’s biggest cities, driving some of the largest price gains. For instance, the median sale price in Bridgeport, Connecticut, in the New York City commuter belt, zoomed past the $500,000 mark in August, rising 30% over last year, according to Redfin. By comparison, the New York City metro median sale price rose less than 3%.?

Meanwhile, home sales in Lake County, Illinois, north of Chicago, rose more than 24% in August over last year, as the activity soars around the Windy City.

List Prices Rise in September

Asking prices have also risen sharply in recent weeks, according to a separate report from realtor.com.?

The average list price rose 11.1% in the week ending Sept. 12 compared to the same week last year. Even if buyers want to tap into low mortgage rates, which have hit a series of historic lows this year, many will find home prices out of reach. And natural disasters are only limiting options further, said Danielle Hale, realtor.com’s chief economist.

“Inventory is so low that any disruption, such as this week’s wildfires and hurricanes, feels even more stifling for would-be home buyers,” Ms. Hale said.

There’s little expectation that U.S. housing supply will improve in the near-term as sellers are even more reluctant to list homes during cold weather and over the holiday season. If strong demand persists, the imbalance could disadvantage home shoppers even more.

“Buyers hoping to take advantage of less competition during the housing off-season will likely be disappointed,” Ms. Hale said, “and could find it even more difficult to find a home.”

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