Home Prices Keep Rising, With Rising Mortgage Rates Likely To Cause a “Delayed Reaction”
Still Rising
The Case-Shiller national home price index shows the average cost of a home increased by 19.8% in February, year-over-year. Tracking 20 US cities, home values saw their biggest increase in Phoenix, Arizona, as well as Tampa and Miami, Florida. Each city’s average home price spiked by around 30% over the past year.
Every one of the 20 cities surveyed reported higher price increases for the year ending in February, compared to the 12-month period ending in January. While the smallest gains were reported in New York City, Minneapolis, and Washington DC, home values still rose by double digits in all three locations.
Chasing Affordability
Market observers say rising prices have would-be homebuyers hunting for more affordable locations. This is especially true as remote work becomes more common, and employers grant more flexibility on where employees live. Realtor.com reports the first-quarter’s top ranked markets offer higher wages and shorter commute times.
That trend appears to have people from California, Colorado, and the East Coast looking at emerging markets. This includes Rapid City, South Dakota. It’s the state’s second-largest city and checked in as the top market for Q1 2022. Another so-called hidden gem is Topeka, Kansas, which has been praised for its affordability and was identified as the 16th hottest market over the same period.
What’s Next?
While home values remained on the rise in February, analysts note Case-Shiller’s pricing index is a three-month running average. This means the impact of increasing mortgage rates has yet to be fully seen, as that trend didn’t begin in earnest until last month.
For this reason, a better leading indicator in terms of home price is pending sales. Prices lag around six months behind transaction volume. Pending sales have been falling for months. Putting that all together, home prices could begin to come down soon. The spring housing market is always a busy one, and homebuyers hope for a little pricing relief, as flowers start to bloom.
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