US home prices rose slightly in March, showing a continuing recovery, according to the latest S&P CoreLogic Case-Shiller US National Home Price Index, released Tuesday.
It’s the second month in a row that prices have increased, after an increase in February that snapped a seven-month streak of month-over-month declines.
After seasonal adjustment, the national index had an increase of 0.4% in March from February. Both the 10-City and 20-City composites saw increases, too. Before seasonal adjustment, the National Index posted a 1.3% month-over-month increase.
“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. “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.”
Low inventory is keeping prices strong
Prices rose in March because buyers who can still afford to continue to house shop after mortgage rates doubled last year are finding fewer homes available to buy. That creates competition and pushes prices up, said Nicole Bachaud, Zillow senior economist.
“As a result, prices started picking back up on a monthly basis in early 2023 following months of price stagnation and declines,” said Bachaud. “As inventory remains a challenge in this market, so too will affordability be rocked by stubbornly high prices that aren’t looking to move drastically any time soon.”
New construction homes could be a welcome alternative to a tight supply of existing homes for sale, and home builders are gaining confidence amid rising sales.
The first quarter of 2023 brought stabilizing mortgage rates, which reached a low of 6.09% in early February and a high of 6.73% in early March, according to Freddie Mac.
“Rates remained within this band for the entirety of the first quarter, enabling buyers to plan for their home purchase without having to adjust for significant mortgage rate volatility,” said Hannah Jones, Realtor.com economic data analyst.
However, she said, even as buyers adjusted to the new normal of mortgage rates, home sellers continue to feel ‘locked in’, hesitant to take on a new mortgage at today’s rates. “As a result, many owners are choosing not to list their home for sale, creating a challenging buying environment and heightened competition in many areas.”
Nationally, prices are still growing annually — but just barely
Prices are rising on a year-over-year basis, although the amount of that price growth has been getting smaller for the past several months. Home prices went up 0.7% in March from the year before, down from 2.1% in the previous month.
The 20-City index and the 10-City indexes showed annual declines. The 10-City Composite showed an annual decrease of -0.8%, which was down from 0.5% increase in the previous month. The 20-City Composite posted a -1.1% year-over-year loss, down from a 0.4% gain in the previous month.
Looking at the 20 city index, the overwhelming majority —19 of the 20 cities — reported lower prices in the year ending in March than the year ending in February, with only Chicago showing an increase at 0.4%.
“One of the most interesting aspects of our report continues to lie in its stark regional differences,” said Lazzara. “The farther west we look, the weaker prices are.”
Miami continued to have the largest year-over-year price growth for the eighth consecutive month with a 7.7% increase. It was followed by Tampa, Florida, with a 4.8% increase; and Charlotte, North Carolina, which was up 4.7% from a year ago.
Meanwhile, in Seattle, prices are down 12.4%, now ahead of San Francisco, which is down 11.2%. The West, which is down 6.2% from a year ago, remains the weakest and the Southeast, which is up 5.4%, remains the country’s strongest region.
The future of the housing market hinges on the outcome of current economic uncertainty amid mixed signals, said Jones.
“Investors are keeping a close eye on debt ceiling negotiations as well as the potential outcome of the upcoming Federal Reserve meeting, both of which have the potential to push interest rates higher,” said Jones.
Meanwhile, she said, inflation is slowing and the unemployment rate is at its lowest level since 1969.
“Easing inflation, a strong job market and cooling home price growth offer some optimism to home shoppers who have been plagued with high costs over the last few years,” said Jones. Still, “the housing market is likely to remain relatively tense until either home prices or mortgage rates fall enough to bring balance via both buyer and seller activity.”
