After seven consecutive months of decline, US home prices experienced a much-needed boost in February, according to recently released data. The nationwide increase in home prices signals a shift in the housing market as the spring buying season gets underway.
The S&P CoreLogic Case-Shiller U.S. National Home Price Index revealed a 0.2% month-over-month increase in home prices after seasonal adjustment. In comparison to the previous year, prices rose by 2%. The 20-City Composite Home Price Index, which tracks price growth in major US metro areas, showed a year-over-year gain of 0.4%, with Miami, Tampa, and Atlanta witnessing the highest annual increases.
Zillow senior economist Nicole Bachaud attributes the bump in home prices to a return to normalcy during the spring buying season. She highlighted the continued low inventory, as sellers remain locked into their low mortgage rates. This situation has left many potential homebuyers unable to enter the market due to affordability constraints and fluctuating mortgage rates.
Recent Commerce Department data revealed an 0.8% decrease in housing starts in March, driven primarily by a 6.7% drop in new multifamily unit construction. Additionally, mortgage rates climbed to 6.39% last week, following over a month of declines.
Bachaud predicts that the low inventory environment will continue to create competition for the limited number of available homes, causing prices to reverse their downward trend from last year's peak in the coming months.
Craig J. Lazzara, managing director at S&P DJI, noted that the recent home price data precedes the commercial banking disruptions that began in March. He believes that the housing market may face further challenges as the Federal Reserve continues its fight against inflation.
Lazzara stated, "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." Consequently, mortgage financing and potential economic weakness are expected to hinder housing prices for the next several months.