Home prices continued their upward trend in February, defying high mortgage rates and low inventory of homes for sale.
The S&P CoreLogic Case-Shiller national housing index rose 6.4% from February a year ago and up from the 6% annual increase registered in January. San Diego led the way with an 11.4% annual increase, while Chicago and Detroit followed with 8.9% gains. For the month, the national index rose by 0.4%.
“Following last year’s decline, U.S. home prices are at or near all-time highs,” said Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P Dow Jones Indices. “Since the previous peak in prices in 2022, this marks the second time home prices have pushed higher in the face of economic uncertainty. Enthusiasm for potential Fed cuts and lower mortgage rates appears to have supported buyer behavior, driving the 10- and 20- City Composites to new highs.”
The housing market remains caught in the crossfires of high prices, elevated mortgage rates and low inventory of homes for sale, although that has been improving of late. Mortgage rates, however, have inched up recently and the rate on the benchmark 30-year fixed rate loan sits at about 7%.
“Seller activity continued to pick up into the early spring, climbing 23.5% year over year in March, in part due to a 15.5% increase in new listings in the month,” said Hannah Jones, senior economic research analyst at Realtor.com.
“Affordable inventory (homes priced between $200,000 and $350,000) saw an even more significant 30.5% increase annually in March,” Jones added. “Buyers have been eagerly awaiting more favorable housing conditions, and an increase in for-sale inventory is a step in the right direction. However, home prices continued to increase annually in many areas across the U.S. which, coupled with mortgage rates near 7%, means that purchasing a home remains challenging for many buyers.”
Robert Frick, corporate economist at Navy Federal Credit Union, said that “with relatively few homes on the market and pent-up demand only mounting, it’s not surprising that home prices continue to rise.”
“Lower mortgage rates may bring some relief to home affordability, but with the Fed likely locked into a higher-for-longer rate situation, we shouldn’t expect that any time soon.”
The home price report, though dated, is one of several reads on the state of the economy this week that include the monthly jobs report from the Labor Department and the April consumer confidence survey from the Conference Board.
