Strong demand and tight supply continue to push home values higher, even as mortgage rates continue to rise. According to the S&P CoreLogic Case-Shiller national home price index, home prices in February jumped 6.4% year over year, following a 6% annual gain in January. This represents 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. Similarly, 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.”
San Diego saw the biggest gain among the 20 cities in the index, with prices up 11.4% from February 2023. Chicago and Detroit both reported 8.9% annual increases. Portland, Oregon, saw the smallest gain in the index, with just a 2.2% increase.
“The Northeast region, which includes Boston, New York, and Washington, D.C., ranks as the best performing market for over the last half year,” according to Luke. “As remote work benefited 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.”
Despite rising mortgage rates, home prices have continued to rise, marking the second time this has occurred in the face of economic uncertainty since the 2022 peak. The first decline followed the start of the Federal Reserve’s hiking cycle, while the second decline followed the peak in average mortgage rates last October.
It’s important to note that this index records prices on a three-month moving average, meaning they go back as far as December, when mortgage rates hit their recent lows. At that time, there was also a strong expectation that the Federal Reserve would lower interest rates, which may have driven buyers to jump in.
However, since then, mortgage rates have jumped nearly a full percentage point, and persistent inflation has lowered expectations that the Fed will cut rates significantly this year.
