Home prices rose to a new record in February amid continued recession housing shortageEven though mortgage rates are high and affordability is out of reach for more Americans.
Nationally, prices rose 6.4% year over year in February, the S&P CoreLogic Case-Shiller Index showed on Tuesday. This was up from the 6% annualized increase recorded in the previous month. This was the highest growth pace since November 2022.
On a monthly basis, prices rose 0.4%, according to the index.
“Home prices continue to fall below expectations in the face of high mortgage rates and worsening affordability,” said Lisa Sturtevant, chief economist at Bright MLS.
The composite index for 10 cities, including Los Angeles, Miami and New York, rose at an annual rate of 8%, up from a 7.4% increase in January. The 20-city composite index, which also tracks home prices in Dallas and Seattle, posted an annualized increase of 7.3%, also up from the 6.6% figure recorded the previous month.
Prices rose in 18 of the 20 major metropolitan markets included in the index.
San Diego had the biggest price increase, with an 11.4% increase compared to the previous year. Chicago and Detroit followed with increases of 8.9% each. In fact, home prices in San Diego, Los Angeles, Washington DC, and New York all hit record highs in February.
The smallest increase in February was in Portland, Oregon, where home prices rose just 2.2% from a year earlier.
“Following last year’s decline, U.S. home prices are at or near all-time highs,” Brian Luke, head of commodities, physical and digital assets at S&P DJI, said in a release. “This is the second time house prices have increased in the face of economic uncertainty, since the previous price peak in 2022.”
The Case-Shiller Index is reported with a two-month lag, so you may not be able to see the latest market trends.
There are many drivers behind the affordability crisis. Years of poor construction have exacerbated the country’s housing shortage, a problem later exacerbated by soaring mortgage rates and expensive construction materials.
Rising mortgage rates over the past three years have also had a “golden handcuff” effect on the housing market. Sellers who locked in record-low mortgage rates below 3% at the start of the pandemic have been reluctant to sell, further limiting supply and leaving eager buyers with few options.
Economists expect mortgage rates to remain high in 2024 and only begin to fall once the Federal Reserve begins cutting rates.
Still, interest rates are unlikely to return to the low levels seen during the pandemic. Add to that a series of better-than-expected inflation reports earlier this year, and investors are increasingly skeptical that the Fed will raise rates this year.
