Home prices in the US experienced an increase in February at the quickest rate since last year's November.
The S&P CoreLogic Case-Shiller US National Home Price Index, which measures home prices nationwide, increased by 6.4% in February compared to the same month last year. This growth is larger than the 6% increase observed in January. On a monthly basis, the index saw a 0.4% rise in February after adjusting for seasonal changes.
The Case-Shiller 20-city index experienced a growth rate of 7.3% year-over-year in February, which is greater than the 6.6% seen in January. Among these cities, San Diego experienced the highest increase in home prices with an 11.4% rise, followed by Chicago and Detroit. On the other hand, home prices in Portland, Oregon, remain low after a consecutive period of the smallest year-over-year growth.
Brian Luke, the head of commodities, real, and digital assets at S&P Dow Jones Indices, said in a statement, "US home prices are rising rapidly. However, on a monthly basis, home prices are struggling due to high borrowing costs. Only Southern California and Washington, DC have weathered the rising wave of interest rates and returned a profit so far this year."
Higher home prices followed by raised mortgage rates have made it difficult for potential buyers to enter the market. The housing market in America gradually recovered from the beginning of the year. Home sales had surged from their all-time lows in the fall, and homebuilders had shown increased optimism about the economy. However, this positive trend seems to have slowed down.
Existing home sales dropped significantly in March as prices increased that month, according to data from the National Association of Realtors. Similarly, residential construction of single-family homes experienced a sharp decline that month, reaching a seasonally adjusted annual rate of 1.022 million units, down from 1.156 million units in February.
Inflation, which was expected to be transient, persisted more than anticipated, causing bond yields to surge. This in turn sent mortgage rates increasing, with the 10-year US Treasury yield reaching above 4.7%, the highest level since November. Consequently, the average 30-year fixed-rate mortgage rose to 7.17%, the highest level since November. Economists anticipate that mortgage rates won't decline substantially this year, and they may even increase if inflation remains high.
Rising mortgage rates, along with increasing home prices and stagnant incomes, are creating a significant challenge for potential buyers.
A different indicator of home prices released by Moody's Analytics revealed a slowdown in prices last month. The Moody's Analytics House Price Index showed a 0.12% rise in March, marking "the slowest pace of monthly gains in more than a year," according to a press release.
Despite this piece of positive news, the US housing market continues to be a challenging environment for homebuyers due to high mortgage rates, Matthew Walsh, a housing economist at Moody's Analytics, mentioned in a press release.
"Many prospective home buyers have been pushed out of the market," Walsh stated.
However, there have been some encouraging signs in terms of housing inventory. Unsold homes in the United States saw a 4.7% increase in March from the previous month, reaching 1.11 million units, and a 14.4% rise from a year ago, according to data released by the National Association of Realtors. Additionally, more homes entered the market in February.
This uptick in inventory provides a positive sign but is still insufficient to meet the demand. The persistent lack of supply can be traced back to various factors, but one large cause is that homeowners are not selling due to their desire to maintain their low mortgage rates. This scenario continues to impact affordability.
"Home sales remain stagnant due to the lack of movement in interest rates," Lawrence Yun, the chief economist at NAR, stated earlier in March. "More inventory is needed."
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Source: edition.cnn.com
