In February, house prices in the United States reached a new record high despite the increase in mortgage rates. Strong demand for housing and tight housing supply continue to drive up prices.
According to the S&P CoreLogic Case-Shiller national home price index released on Tuesday (April 30), house prices in February rose by 6.4% compared to the previous year. This marked another increase following the 6% annual rise last month and was the fastest growth rate since November 2022.
The composite annual growth rate of house prices in 10 cities was 8%, higher than the 7.4% increase from the previous month. The 20-city composite annual growth rate of house prices was 7.3%, higher than January’s 6.6% increase. Among these 20 cities, San Diego saw the largest increase in house prices in February, reaching 11.4%, followed by Chicago and Detroit, both with an annual growth rate of 8.9%. Portland, Oregon had the smallest increase at 2.2%.
On a monthly basis, the home price index adjusted for seasonal factors rose by 0.4% in February.
Brian Luke, Managing Director of Commodities, Real Estate, and Digital Assets at S&P Dow Jones Indices LLC, stated in a press release: “Following last year’s decline, U.S. house prices are currently at or near historic highs. For the third consecutive month, annual house prices in all cities have increased, with four cities currently at their historic peaks: San Diego, Los Angeles, Washington D.C., and New York.”
“Since the previous peak in house prices in 2022, this is the second time prices have increased in a period of economic uncertainty. The first decline was after the Federal Reserve began its rate hike cycle. The second decline was after average mortgage rates peaked in October last year,” added Luke.
Years of inadequate construction have exacerbated the housing shortage in the country, and the rapid rise in mortgage rates and expensive building materials have further worsened the issue.
The S&P CoreLogic Case-Shiller index releases reports with a two-month delay, which means it may not reflect the latest market dynamics.
Economists predict that mortgage rates will remain high in 2024 and are only expected to decrease once the Federal Reserve begins cutting rates.
However, rates are unlikely to return to the lows seen during the pandemic period. Moreover, in light of a series of higher-than-expected inflation reports at the beginning of the year, expectations for a significant rate cut by the Federal Reserve this year have been lowered.