Monthly appreciation in March continued to heat up beyond the typical seasonal uptick, pushing prices up by 1.3%
While home prices appear to remain impervious to high mortgage rates, the overall housing market appears to be stuck in second gear. Home sales so far this year are only slowly bucking last year’s numbers in most markets despite some increase in inventory.
Still, more homes available for sale is a welcome change from last year and suggests that housing markets are indeed thawing and gradually normalizing. Nevertheless, there are still regional variations in both available inventory and demand.
In markets with the most supply improvements in inventory, such as Florida, Texas and the Southeast in general, demand has cooled some from last year’s frenzy, and home price growth is rapidly decelerating. According to the latest CoreLogic HPI data, the top five coolest markets are New Orleans;, Austin, Texas; San Antonio; Cape Coral, Florida and North Port, Florida – all markets with either significant supply gains or concerns over the rising costs of insurance and maintenance (including the. increases of homeowners’ association fees). In addition, due to concerns of rising insurance costs and the availability of coverage, given the frequency of disastrous weather events, these areas could see some home price declines going forward, as additional homeownership expenses get capitalized into home prices.
By contrast, markets with the strongest home price gains, particularly those in the Northeast and West, continue to struggle with home inventory shortages and sales but have strong demand, which is driving appreciation in those markets and in the national index. But some of those markets are also finally seeing gains in home sales compared with last year, particularly markets in the San Francisco Bay Area.
In March, the U.S. CoreLogic S&P Case-Shiller Index flattened out at a 6.5% year-over-year gain, the ninth straight month of annual appreciation (Figure 1). With the rebound in appreciation since early 2023, home prices are now up by 2.7% compared with the June 2022 peak.
But more interestingly, the non-seasonally adjusted month-over-month index continued to show a strong seasonal increase, up by 1.3%, notably higher than the 0.8% increase recorded on average between 2015 and 2019 (Figure 2) in March. Last spring, when home price growth heated up beyond the seasonal trend, March’s monthly increase was also 1.3%.
The 10-city and 20-city composite indexes also posted their ninth straight months of annual increases in March, accelerating to 8.2% and 7.4%, respectively. The 10-city index includes currently better-performing metro areas such as New York and Chicago, which have seen relatively stronger housing markets since mid-2022, as the return to cities and offices continues. On the other hand, among markets in the 20-city index, the resetting continues for pandemic-era boomtowns, which then saw excessive gains in home prices, while markets with strong appreciation over the last year are now seeing some cooling too, such as Tampa, Florida and Detroit.
Compared with the 2006 peak, the 10-city composite index is now 51% higher, while the 20-city composite is up by 57%. Adjusted for inflation, which is showing signs of easing, the 10-city index is now 3% higher than its 2006 level, while the 20-city index is up by 7% compared with its 2006 high point. Nationally, home prices are 16% higher (adjusted for inflation) compared with 2006.
In March, only 10 out of 20 metros saw faster price growth year over year compared with the previous month (Figure 3), though acceleration in annual gains continues to reflect a comparison with the home price trough in early 2023. Divergence across metros in rate of appreciation compared with February reflects the tale of two markets noted earlier, where some markets contending with rising non-mortgage costs and less demand are now starting to see slower rates of home price growth.
San Diego, New York, Cleveland and Los Angeles lead the 20-city index, with respective annual gains of 11.1%, 9.2%, and 8.8% for the latter two. Twelve metros saw annual price gains higher than the national 6.5% increase. San Diego recorded the third month of double-digit annual increases in March. The strongest annual price acceleration compared with the previous month was seen in Cleveland, Seattle and Boston.
Portland, Oregon and Denver are the slowest appreciating markets, up by slightly more than 2% compared with last year.
While home prices increased by 1.3% nationally from February to March, 17 metros recorded stronger monthly gains. Figure 4 summarizes the current year’s monthly changes in March compared with averages recorded between 2015 and 2019.
Seattle, San Francisco and Cleveland posted the nation’s largest monthly gains, a respective 2.7%, 2.6% and 2.4%. Tampa’s prices were down by 0.2% in March – making it the only market with a monthly loss. Tampa also saw a considerable increase in new listings this spring, which may driving some of price cooling. Other markets in the Southeast and Southwest, such as Miami; Charlotte, North Carolina; Las Vegas and Phoenix, saw relatively weaker appreciation in March compared with markets in the West and Midwest (Figure 4).
The month-over-month comparison of appreciation by price tier and location also reveals relative changes in demand across the country. In March, most metros and price tiers continued to see home prices increase. Tampa, again, was the only market where prices fell, particularly for low-tier homes. High-tier home prices were on average up at the fastest pace, by 1.8%, while the middle tier was up by 1.5% and the low tier by 1.4%. San Francisco’s middle and high tiers appreciated by more than 3% (Figure 5).
While the S&P CoreLogic Case-Shiller Index continues to show home price resiliency amid surging borrowing costs, it also highlights continued challenges for the housing market, namely affordability issues for potential homebuyers, as the cost of homeownership is skyrocketing, particularly when it comes to homeowners’ insurance and property tax increases, driving some sellers and investors to sell those homes. Longer term, it will be important to address how these non-mortgage costs affect potential homebuyers and existing homeowners, particularly those with fixed incomes. The weakness in low-tier home prices in Tampa highlights some of these potential challenges.
On the other hand, markets in proximity to major employment centers and those that may have lagged in price strength during the pandemic are now driving most of the increase in home prices. Naturally, a strong labor market over the last few years and ensuing wage and wealth gains are helping drive demand in these markets, while a lack of homes for sale and new construction are putting pressure on prices.
