A Redfin sign in front of a home for sale in Atlanta, Georgia on Sunday, November 13, 2022.
Eliza Novelz Bloomberg | getty images
Home values continue to rise due to strong demand and tight supply, even though mortgage rates are now moving higher again.
According to the S&P CoreLogic Case-Shiller national home price index, home prices rose 6.4% year over year in February, another increase following the previous month’s 6% annual increase. This was the fastest rate of price rise since November 2022.
The 10-city composite rose 8%, up from a 7.4% increase in the previous month. The 20-city composite saw annual growth of 7.3%, up from a 6.6% gain in January.
“After last year’s decline, U.S. home prices are at or near all-time highs,” said Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices. “For the third consecutive month, all cities have recorded annual price increases, 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 index’s 20 cities, up 11.4% from February 2023. Chicago and Detroit both recorded 8.9% annual growth. The index saw the smallest gain of only 2.2% in Portland, Oregon.
“The Northeast region, which includes Boston, New York and Washington, DC, ranks as the best-performing market over the past half year. As remote work benefited smaller (and sunnier markets) in the first half of the decade, So return According to Luke, the office could contribute to better performance in the larger metropolitan markets of the Northeast.
“Since the previous peak in prices in 2022, this is the second time that home prices have increased due to economic uncertainty. The first decline followed the start of the Federal Reserve’s hiking cycle. The second decline followed the peak in average mortgage rates “It happened last October,” he said.
This index records prices on a three-month moving average, so they move up to December, when mortgage rates hit their recent lows. There was also strong expectation then that the Federal Reserve would reduce interest rates. This may have inspired buyers to get involved.
However, since that time, mortgage rates have jumped by almost a full percentage point. Moreover, stubborn and persistent inflation has dampened expectations that the Fed will cut rates significantly this year.