A Redfin sign for a home for sale in Atlanta, Georgia, on Sunday, November 13, 2022.
Elia Nouvelage | Bloomberg | Getty Images
Strong demand and tight supply continue to push up home values, even as mortgage rates are now rising again.
According to the S&P CoreLogic Case-Shiller National Home Price Index, home prices rose 6.4% year over year in February, up again from the 6% annual increase the previous month. It was the fastest price growth rate since November 2022.
The 10-city composite figure rose 8%, compared with a 7.4% increase in the previous month. The 20-city composite recorded an annual gain of 7.3%, compared with a 6.6% increase in January.
“After last year's decline, U.S. home prices are at or near record highs,” said Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices. “For the third month in a row, all cities reported increases in annual prices, with four currently at all-time highs: San Diego, Los Angeles, Washington, DC and New York.”
Prices in San Diego saw the largest increase among the 20 cities in the index, up 11.4% from February 2023. Both Chicago and Detroit reported an annual increase of 8.9%. Portland, Oregon, saw the smallest gain in the index at just 2.2%.
“The Northeast region, which includes Boston, New York and Washington DC, ranks as the best-performing market over the past six months. As remote working benefited smaller (and sunnier markets) in the early part of the decade, a return to the office could contribute to outperformance in the larger metropolitan markets in the Northeast,” said Luke.
'Since the previous price peak in 2022, this is the second time that house prices have risen in the face of economic uncertainty. The first decline followed the start of the Federal Reserve's rate hike cycle. The second decline followed the peak of the average mortgage interest rate. last October,” he added.
This index records prices on a three-month moving average basis, so they go back to December, when mortgage rates hit their recent low. There was also a strong expectation at the time that the Federal Reserve would cut interest rates. That may have prompted buyers to jump in.
Since then, however, mortgage rates have risen by almost a full percentage point. In addition, persistent and persistent inflation has lowered expectations that the Federal Reserve will cut rates significantly this year.