Home Prices Moderated In February
Data released today shows a modest increase in home prices took place in February.
Year-over-year, prices increased by 2%, down from 3.7% in the previous month, according to the S&P CoreLogic Case-Shiller National Home Price NSA Index.
The 20-City Composite posted a 0.4% year-over-year gain, down from 2.6% in the previous month.
“February’s results were most interesting because of their stark regional differences… It’s unsurprising that the Southeast (+7.8%) remains the country’s strongest region, while the West (-4.2%) continues as the weakest,” noted Craig J. Lazzara, Managing Director at S&P DJI.
West Coast hubs that saw huge migration during the pandemic remained negative YOY in February, with San Francisco, Seattle, San Diego, and Portland all experiencing declines.
Southern cities continued to see gains, with Miami (+10.8%), Tampa (+7.7%), and Atlanta (+6.6%) topping the list, though these were smaller than their 10%+ increases last month.
“The results released today pre-date the disruptions in the commercial banking industry which began in early March. Although forecasts are mixed, so far the Federal Reserve seems focused on its inflation-reduction targets, which suggests that interest rates may remain elevated, at least in the near term. Mortgage financing and the prospect of economic weakness are therefore likely to remain a headwind for housing prices for at least the next several months,” Lazzara said.
Analysts expect that the Federal Reserve will raise interest rates by 25 bps in its May meeting. After that, the Fed may take a break with increases.
According to the latest Federal Housing Finance Agency House Price Index, house prices were up 4% YOY and 0.5% from January.
“U.S. house prices increased slightly in February,” said Dr. Nataliya Polkovnichenko, Supervisory Economist for FHFA’s Division of Research and Statistics. “This increase was, in part, due to a decline in mortgage rates by more than half a percentage point from the peak reached in early November as well as historically low housing inventory.”
Entry-level inventory has risen just 1% in the last year, compared to 8% for mid-priced and 13% for high-tier homes. Prices for these houses are trending up thanks to hot competition, while prices are falling for more expensive homes.
Redfin’s Homebuyer Demand Index rose 3% from a week prior and 12% from a month earlier during the week ending April 16.
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