For the bulk of last year, home prices were declining, but now it appears that trend is reversing, and they’re once again on the rise, creating struggles for buyers.
The biggest culprit behind the increasing home prices is a big drop in new listings, compounded by the already-limited supply of houses for sale. While most thought the spring real estate market would be fairly dismal because of increased interest rates and economic uncertainty, it seems to be heating up in many parts of the country. We’re again seeing bidding wars and homes going for above their original asking price.
Home prices went up 0.45%, seasonally adjusted, from February to March, according to data from Black Knight Home Price Index that was provided to CNBC. Following revisions on the data from January and February, it’s the third month in a row with increasing prices.
Around 30% fewer new listings hit the market in March compared to the norms before the pandemic. The deficit of housing inventory keeps increasing because fewer sellers want to put their houses on the market, knowing they’d likely be stuck with a much higher interest rate on a new mortgage than what they’re currently holding on to.
All of this comes during the spring when historically the demand for houses is already highest.
Andy Walden, vice president of enterprise research for Black Knight, said that there was a modest bump in homebuyer demand that ran head-on with a falling inventory of house supply. He said that five months ago, prices were declining on a month-to-month seasonally adjusted basis in 92% of all the country’s major markets. Then, jumping ahead to March, the situation has done a complete 180, according to Walden, and home prices are rising in 92% of markets from February.
Redfin says that almost half of the homes on the market sell in two weeks, the highest share in almost a year.
There are some regional differences, with prices in the Western part of the country significantly off recent peaks, but 40% of other markets have seen their prices jump back to peak levels.
Of the 50 largest housing markets in the country based on population, only three are seeing a fall in month-to-month prices—Austin, Salt Lake City, and San Antonio. In Dallas and Phoenix, prices are flat.
Mortgage rates are currently off their highs, but not significantly. The average rate on a 30-year fixed mortgage has been hovering between 6% and 7%, but during the initial years of the pandemic, it was around 3%.
Analysts feel buyers are probably getting used to the higher rates, as is reflected in strengthening sales over the past few months, with homebuilders reporting strong earnings.
CoreLogic released a report recently looking at comparisons in home prices from a year ago, and this report also showed gains month-to-month. In March, prices were slightly over 3% higher than last year nationally, but the Sunbelt markets were well-outpacing cities in the West and the Northeast. In Miami, prices were up almost 15% from a year before.
Home prices in ten states are lower than last March based on the CoreLogic data. These are Washington, Idaho, Nevada, Utah, California, Montana, Oregon, Colorado, Arizona, and New York.
Selma Hepp, the chief economist for CoreLogic, said the rebounding home prices are indicative of the lack of inventory in the housing cycle, and mobility from continued remote work seems to be driving home prices in some parts of the country.