Strong demand and tight supply continue to push home values higher, even though mortgage rates are now moving higher again.
Home prices in February jumped 6.4% year over year, another increase after the prior month’s annual gain of 6%, according to the S&P CoreLogic Case-Shiller national home price index released Tuesday. It was the fastest rate of price growth since November 2022.
The 10-city composite rose 8%, up from a 7.4% increase in the previous month. The 20-city composite saw an annual gain of 7.3%, up from a 6.6% advance in January.
“Following last year’s decline, U.S. home prices are at or near all-time highs,” said Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices. “For the third consecutive month, all cities reported increases in annual prices, with four currently at all-time highs: San Diego, Los Angeles, Washington, D.C., and New York.”
Prices in San Diego saw the biggest gain among the 20 cities in the index, up 11.4% from February of 2023. Both Chicago and Detroit reported 8.9% annual increases. Portland, Oregon, saw the smallest gain in the index of just 2.2%.
“The Northeast region, which includes Boston, New York, and Washington, D.C., ranks as the best performing market for over the last half year. As remote work benefitted smaller (and sunnier markets) in the first part of the decade, return to office may be contributing to outperformance in larger metropolitan markets in the Northeast,” according to Luke.
“Since the previous peak in prices in 2022, this marks the second time home prices have pushed higher in the face of economic uncertainty. The first decline followed the start of the Federal Reserve’s hiking cycle. The second decline followed the peak in average mortgage rates last October,” he added.
This index records prices on a three-month moving average, so they go back as far as December, when mortgage rates hit their recent lows. There was also a strong expectation then that the Federal Reserve would lower interest rates. That may have driven buyers to jump in.
Since that time, however, mortgage rates have jumped nearly a full percentage point. In addition, stubborn and persistent inflation has lowered expectations that the Fed will cut rates significantly this year.