A Redfin sign in front of a home for sale in Atlanta, Georgia, on Sunday, November 13, 2022.
Ilya Novelage | Bloomberg | Getty Images
Strong demand and tight supply continue to push home values higher, although mortgage interest rates are now moving higher again.
Home prices in February jumped 6.4% year-over-year, another increase after the previous month's 6% year-over-year increase, according to the S&P CoreLogic Case-Shiller National Home Price Index released Tuesday. This was the fastest rate of price growth since November 2022.
The 10-city composite index rose 8%, compared to an increase of 7.4% in the previous month. The 20-city composite index saw annual gains of 7.3%, up from 6.6% in January.
“After last year’s decline, U.S. home prices are at or near all-time highs,” said Brian Locke, head of commodities, real and digital assets at S&P Dow Jones Indices. “For the third month in a row, all cities reported annual price increases, with four cities currently at all-time highs: San Diego, Los Angeles, Washington, D.C., and New York.”
Prices in San Diego saw the largest increase among the 20 cities included in the index, up 11.4% from February 2023. Chicago and Detroit both recorded annual increases of 8.9%. Portland, Oregon, saw the smallest gain in the index, at only 2.2%.
“The Northeast, which includes Boston, New York, and Washington, D.C., ranks as the best-performing market over the past half year. As remote work benefited from smaller (and brighter) markets in the early part of the decade, see Office May Contribute to Performance Outperformer in major metropolitan markets in the Northeast,” according to Luke.
“Since the previous price peak in 2022, this is the second time home prices have risen in the face of economic uncertainty. The first decline came after the start of the Fed's hiking cycle. The second decline came after the peak in average mortgage rates Real estate added last October.
This index records prices on a three-month moving average, so it goes back to December, when mortgage rates reached their recent lows. There were also strong expectations at the time that the Fed would cut interest rates. That may have prompted buyers to jump in.
But since that time, mortgage rates have jumped nearly a full percentage point. In addition, stubborn and persistent inflation has lowered expectations that the Fed will cut interest rates significantly this year.
