Home Prices Rise, Squeezed by Fewer Listings, Case-Shiller Index Finds
By Aarthi Swaminathan
The numbers: Home prices rose in March as sellers held out on listing their homes, constraining supply.
Despite elevated mortgage rates, the S&P CoreLogic Case-Shiller 20-city home-price index rose 0.5% in March, as compared with the previous month.
Home prices were strongest in the Southeast, while prices in the West continued to drag. Though buyer demand has outpaced supply in March, surging mortgage rates may dampen home sales. The rate for the 30-year mortgage in May is over 7%, according to Mortgage News Daily.
Year-over-year appreciation was down 1.1%, a dip after home prices rose 0.4% in February. The 20-city index peaked in June 2022.
A broader measure of home prices, the national index, rose 0.4% in March compared with February and was up 0.7% over the past year.
All numbers were seasonally adjusted.
Key details: Cities in the Southeast led home price growth. Miami and Tampa in Florida and Charlotte, N.C., were the three cities with the highest year-over-year gains among the 20 cities in March.
Cities on the West Coast, from Seattle to San Francisco, continued to see weak home-price growth. Home prices in Seattle were down 12.4% from last March.
City Price change from March 2022 to March 2023
Las Vegas -5.1%
Los Angeles -2.9%
New York 3.3%
San Diego -5.3%
San Francisco -11.2%
Composite -20 -1.1%
A separate report from the Federal Housing Finance Agency also showed home prices rising in March, up 0.6% from February.
And over the last year, the FHFA index was up 3.6%.
Big picture: The housing market is being squeezed by a lack of supply.
There aren’t enough homes listed for sale on the market, as home sellers see no incentive in giving up their ultralow mortgage rates for a new home loan with a 7% rate.
But rising rates could soon dampen demand as well, as buyers may find rising costs prohibitive to purchasing a home.
The housing sector is trying to boost both demand and supply: While home builders add to supply with new construction, which has boosted sales of new homes, mortgage lenders are also offering incentives, such as buyers only having to make a 1% down payment. The National Association of Realtors is proposing changes to existing tax policy to boost supply.
What S&P said: “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,” Craig J. Lazzara, managing director at S&P DJI, said.
“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,” he added.
Market reaction: Stocks were mixed in early trading on Tuesday. The yield on the 10-year Treasury note rose above 3.7%.