Home prices continued their upward spiral in March, rising 20.6% annually, according to the S&P CoreLogic Case Shiller price index released on Tuesday.
The gain compares with a revised gain of 20% for February.
Tampa posted the highest one-year increase with a 34.8% gain, while Phoenix saw a 32.4% increase, followed by Miami at 32%. Seventeen of the 20 cities in the index reported higher price increases in the 12 months ending March 2022.
“Those of us who have been anticipating a deceleration in the growth rate of U.S. home prices will have to wait at least a month longer,” said Craig J. Lazzara, managing director at S&P DJI. “The strength of the composite indices suggests very broad strength in the housing market, which we continue to observe.” “All 20 cities saw double-digit price increases for the 12 months ended in March, and price growth in 17 cities accelerated relative to February’s report,” Lazzara added. “March’s price increase ranked in the top quintile of historical experience for every city, and in the top decile for 19 of them.”
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Although home prices rose, other indicators of the housing market have cooled recently as the combination of high prices and sharply higher mortgage rates have crimped demand. New home sales tumbled 16.6% in April, leaving the sales pace down nearly 27% from a year ago. Contracts for pending sales, meanwhile, slipped 3.9% last month.
Much of the decline in housing activity can be explained by the confluence of rising prices, limited inventory and now mortgage rates that have breached 5% for a 30-year fixed rate loan. The Federal Reserve has embarked on an aggressive tightening of monetary policy that is designed to blunt runaway inflation.
“The Federal Reserve is trying to tame inflation and slow demand, leading to a slight normalizing of the housing market,” says Mark Fleming, chief economist at title insurer First American. “But the lack of supply against robust demographic demand will keep price appreciation elevated, so don’t expect a decline in prices anytime soon.”
Fleming says most of the hottest markets in terms of price appreciation are in the South, led by Florida, South Carolina and Georgia while Arizona and Idaho are also among the leaders.
“Homes that are going pending are doing so at the quickest pace on record and the share of homes selling above their asking price is at a record for the spring season,” Zillow economic data analyst Dan Handy said in a statement.
“However, the market may be nearing an inflection point when it comes to price growth,” Handy added. “Mortgage costs are more than 50% higher than they were a year ago and prospective buyers will likely start to rethink what they can afford. Sellers may already be responding, with the rate of price cuts now on the rise, to meet buyers where they are. Price growth will likely begin to come back towards earth as many buyers are priced out and inventory rises.”