March Sees Surge in Home Prices Amid Fierce Competition and Limited Supply

In March, home prices continued their upward trajectory for the second consecutive month, propelled by intense competition among buyers and a shortage of available properties. According to the S&P CoreLogic Case-Shiller index, national home prices experienced a 0.7% increase from February to March. On an annual basis, prices are down by a modest 3.6% from their peak in June 2022, signaling potential signs of stabilization in the housing market.

Craig Lazzara, the managing director at S&P DJI, commented on the recent price increases, stating, “The modest increases in home prices we saw a month ago accelerated in March 2023. Two months of increasing prices do not definitively indicate a recovery, but March’s results suggest that the decline in home prices that began in June 2022 may have come to an end.”

However, the 10-city composite, including cities such as Los Angeles, Miami, and New York, experienced an annual decline of 0.8%, compared to a 0.5% increase in February. Similarly, the 20-city composite, which tracks housing prices in cities like Dallas and Seattle, saw a 1.1% decline in March following a 0.4% gain the previous month.

The housing market exhibited significant disparities in price gains among the 20 cities. Miami emerged as the best-performing city for the eighth consecutive month, recording a remarkable 7.7% annual gain. Tampa followed closely with a 4.8% increase, trailed by Charlotte, N.C., with a rise of 4.7%. Conversely, cities in the West, such as Seattle and San Francisco, witnessed substantial declines, with prices plummeting by 12.4% and 11.2% respectively.

Nicole Bachaud, a senior economist at Zillow, acknowledged the persistent rise in home prices amidst low inventory, high mortgage rates, and widespread affordability challenges. However, she emphasized that prices are still in the process of recovering from the highs seen during the pandemic.

It is worth noting that the Case-Shiller index reports data with a two-month delay, potentially missing the latest market developments. Last year, the interest-rate-sensitive housing market faced a significant slowdown due to the Federal Reserve’s aggressive interest-rate hike campaign. However, as mortgage rates gradually declined from their peak of 7%, and with limited inventory posing challenges for buyers, the housing market has begun to show early signs of reawakening.

In a separate report, the National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, increased by five points to reach 50, marking the highest reading since July. This marked the first time in nearly a year that the index emerged from negative territory.

Alicia Huey, NAHB Chair and a custom home builder and developer from Birmingham, Alabama, noted the increasing significance of new home construction in the marketplace. Many homeowners, benefiting from loans at interest rates lower than current mortgage rates, are choosing to remain in their existing homes. As a result, the supply of existing homes remains at a remarkably low level.

While the housing market shows signs of activity and resilience, the ongoing shortage of inventory continues to present challenges for buyers. The industry will closely monitor these trends to assess the long-term stability and sustainability of the housing market in the coming months.