Home buyers won’t be concerned about home prices right away. (iStock)
Home prices continued to rise in February, according to the latest S&P CoreLogic Case-Shiller National Home Price Index, defying expectations that rising mortgage rates could have a more pronounced negative impact on earnings and exceeding past expectations. Updated the highest. report.
House prices are now 6.4% above levels at this time last year, a further increase on the 6% rise recorded in January. The 10-city total rose 8% annually from 7.4% last month. At the same time, the 20-city composite recorded an increase of 7.3%, up from 6.6% in the previous month.
National home prices rose 0.6% month-on-month after falling the previous month. The 10-city composite recorded a 1% increase, while the 20-city composite increased by 0.9%. This index measures home prices in major cities across the country. This annual and monthly home price increase comes as homebuyers struggle with affordability issues caused by high mortgage rates and a lack of housing supply.
“The last price peak was in 2022, so home prices have declined in the face of economic uncertainty,” said Brian D. Luke, head of commodities, real and digital assets at S&P Dow Jones Indices. This is the second time the price has increased.” “The first decline followed the start of the Federal Reserve’s rate hike cycle. The second decline followed the peak in average mortgage rates last October.”
“Potential Fed interest rate cuts and enthusiasm for lower mortgage rates appear to be supporting buyer activity, pushing the 10 and 20 City composites to new highs,” Luke continued.
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These cities saw the most dramatic increases in home prices.
San Diego reported the highest year-over-year growth, with an annual growth rate of 11.4% in February, the highest year-over-year growth rate among the 20 cities. Chicago and Detroit followed him in second place, each posting an 8.9% annual increase. Portland, Oregon, had the smallest increase in the index at just 2.2%.
“The Northeast region, which includes Boston, New York and Washington, D.C., has ranked among the best-performing markets over the past six months,” Luke said. “Remote work benefited smaller (and sunny) markets in the early 2010s, so the return to the office may be contributing to the outperformance of larger markets in the Northeast.”
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Mortgage interest rates will remain high for a long time
According to the latest gross domestic product (GDP) figures, the personal consumption expenditures (PCE) price index, which excludes food and energy prices – a key indicator tracked by the Federal Reserve to measure inflation – rose by 2 in the fourth quarter. %, and then rose 3.7%. ) report. Jim Baird, chief investment officer at Plante Moran Financial Advisors, said rising inflation could delay the timeline for rate cuts or even raise rates.
“While recession fears have eased for now, inflation remains a key concern for consumers and the outlook remains mixed,” Baird said in a statement. “While inflation has retreated significantly from its peak, it has remained in a relatively narrow range across most measures since last fall. table that could further delay the possibility of additional tightening. ”
The central bank has kept its policy interest rate unchanged at 5.25% to 5.5% since July. Fed Chairman Jerome Powell said after the March meeting that a rate cut this year is still on the table, but the Fed remains committed to lowering inflation to its 2% target rate, saying it was too early to cut rates. warned that there was a risk of a return to inflation. On the other hand, holding back for too long could pose risks to economic growth.
Mortgage rates have hovered above 7% for the past two weeks, and borrowing costs are likely to continue rising as the prospect of a rate cut becomes further remote.
“Like many economic indicators, the road to normalization for the housing market remains windy,” said Thelma Hepp, chief economist at CoreLogic. She said, “While home sales and inventory have improved from last year’s lows, rising mortgage rates continue to challenge affordability, leaving many potential buyers on the sidelines.”
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