Americans hoping for a break in home prices saw no relief in March as home prices climbed for the second straight month, according to the latest S&P CoreLogic Case-Shiller Indices report.
At the core of the continued home price gains is a spring buying season that is defined by increased buyer demand met by limited housing supply.
Home prices across the U.S. increased by 0.7% annually in March, down from the increase of 2.1% in February, according to CoreLogic's S&P Case-Shiller index. However, on a monthly basis, home prices grew 1.3% from February on an unadjusted basis.
"The CoreLogic Case-Shiller Home Price Index shows counterintuitive strength with relatively strong home price growth," CoreLogic Chief Economist Selma Hepp said in a statement. "Spring home buying season is characterized by stronger return of buyers than sellers, which created another competitive market environment and one in which the very meager inventory of existing homes is putting buyers in a position of having to pay over the asking price and as a result driving early spring price gains well beyond what is traditionally seen during this period."
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These West Coast cities saw the biggest monthly home price gain
The 10-city and 20-city composites saw gains of 1.6% and 1.5%, respectively, on a month-to-month basis.
"The acceleration we observed nationally was also apparent at a more granular level," Craig Lazzara, S&P Dow Jones Indices managing director, said. "Before seasonal adjustment, prices rose in all 20 cities in March (versus 12 in February), and in all 20, price gains accelerated between February and March. Seasonally adjusted data showed 15 cities with rising prices in March (versus 11 in February), with acceleration in 14 cities."
The strongest monthly gains were registered in San Francisco, where home prices rose 3% from February, and San Diego, where they increased 2.5%. These West Coast cities had previously seen a decline in home prices on an annual basis.
In addition, higher-priced homes saw the most significant monthly price gains, following months of relatively more considerable weakness after the housing slowdown, according to Hepp.
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Mortgage rates add to the affordability challenge
Mortgage rates have hovered between the 6% to 7% range in the first quarter. The relative stability in mortgages has given buyers more confidence to plan on their home purchase spend without having to adjust for any large swings in rates, according to Hannah Jones, economic research analyst at Realtor.com
The biggest issue for buyers has been finding inventory. Would-be sellers, feeling locked into lower mortgage rates, are reluctant to list their homes, Jones said in a statement. Many sellers are also buyers and switching homes would require a more expensive mortgage.
Housing supply in the first quarter averaged 1.63 million listings, a 40% reduction from the first quarter of 2019, according to the National Association of Realtors (NAR).
"The housing market is somewhat gridlocked as still-high housing costs and low inventory levels mean buyers face budget challenges as well as competition for the limited fresh listings on the market, leading to upward pressure on prices," Jones said. "However, recently stabilized mortgage rates and slowed listing price growth have granted some welcomed breathing room.
"Additionally, buyers have increasingly turned towards new construction to find what they are looking for when confronted with dwindling existing home supply," Jones continued. "The housing market is likely to remain relatively tense until either home prices or mortgage rates fall enough to bring balance via both buyer and seller activity."
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