Home prices across the United States rose for the second consecutive month in March amid widespread shortages and inventory issues, according to data published on May 29.
Home prices increased by 0.4 percent nationwide month over month, data from the S&P CoreLogic Case-Shiller US National Home Price index showed.
That marked the second month in a row of gains after seven consecutive months of price declines. In February, home prices saw a 0.2 percent month-over-month increase.
Nationwide, home prices in March were 0.7 percent higher year over year, although still lower than the 2.1 percent annual gain seen in February.
The index is now just 3.6 percent below its June 2022 peak, according to S&P.
Elsewhere, S&P’s 20-city home price index, which tracks housing values in the 20 largest metropolitan areas, saw a month-over-month increase of 0.5 percent, after seasonal adjustment.
Before seasonal adjustment, S&P’s 20-city home price index rose by 1.5 percent, according to the data. The 10-city home price index saw increases, too.
Mortgage Rates, Volatile Economy Impacting Market
“Two months of increasing prices do not a definitive recovery make, but March’s results suggest that the decline in home prices that began in June 2022 may have come to an end,” said Craig Lazzara, managing director at S&P DJI, in a statement. “That said, the challenges posed by current mortgage rates and the continuing possibility of economic weakness are likely to remain a headwind for housing prices for at least the next several months.”
While housing prices are up nationwide, S&P analysts noted some “stark regional differences”—housing costs in Miami, for example, are up 7.7 percent, while costs in Tampa, Florida, and Charlotte, North Carolina, are up nearly 5 percent.
Further West, in places like Seattle and San Francisco, prices have fallen between 11–12 percent year over year, according to the data.
The latest data come amid soaring mortgage rates and a limited supply of new and existing homes being placed on the market that has put pressure on U.S. home prices nationwide. The ongoing debt-limit negotiations and inflation that just won’t budge have further added to the woes.
The average rate on a 30-year fixed-rate mortgage hit 7.12 percent on May 25, according to Mortgage Daily News (MDN), surpassing the March 2 high of 7.10 percent.
According to the Mortgage Bankers Association (MBA), mortgage loan-application volumes also decreased 4.6 percent on a seasonally adjusted basis during the week ended May 19, and was 5 percent lower than the previous week on an unadjusted basis; marking the second consecutive weekly decline, which experts credited to borrowers remaining “sensitive to higher rates.”
Prices Unlikely to Fall
“Since rates have been so volatile and for-sale inventory still scarce, we have yet to see sustained growth in purchase applications,” MBA vice president Joel Kan said. “Refinance activity remains limited, with the refinance index falling to its lowest level in two months and more than 40 percent below last year’s pace.”
Mortgage rates are widely expected to rise further as the Federal Reserve continues to increase interest rates in order to bring down inflation.
According to the National Association of Realtors (NAR), existing-home sales slid 3.4 percent from March, to 4.28 million units in April, and were down 23.2 percent year over year.
The situation is relatively similar for home sales under contract, which remained unchanged in April, according to the National Association of Realtors index, which experts again credited in part to limited inventory and affordability challenges.
Bankrate mortgage analyst Jeff Ostrowski believes that mortgage rates will likely remain between 5–6 percent over the next year, creating a “tough market where there are going to be more buyers than sellers for the foreseeable future.”
“And when that’s the case, it’s hard to see prices really fall,” he told Business Insider.
However, Zillow senior economist Nicole Bachaud told HousingWire that while she believes inventory issues and high prices will likely remain a challenge, new construction could bring some relief to buyers.
“New construction could be the beacon of light the housing market desperately needs right now, as home builders are gaining confidence among rising sales, hopefully soon to translate to more residential construction breaking ground in the coming months,” Bachaud said.
