Rising mortgage rates haven’t put a damper on home prices — yet.
The S&P CoreLogic Case-Shiller Index posted a 19.8 percent annual gain in February. The figure is an increase from the 19.1 percent gain posted in January and the third-largest reading posted in 35 years.
The 10-city composite, comprising the 10 largest metros, gained 18.6 percent year-over-year, up from 17.3 percent in January. Meanwhile, the 20-city composite posted an annual gain of 20.2 percent, an increase from 18.9 percent in January.
Craig Lazzara, S&P DJI managing director, noted that each composite reflected an acceleration of price growth from January’s levels.
“U.S. home prices continued to advance at a very rapid pace in February,” Lazzara said.
For the 33rd consecutive month, Phoenix saw the largest growth, with a 32.9 percent price increase from 2021. Two Florida cities, Tampa and Miami, finished in second and third place with 32.6 percent and 29.7 percent annual increases, respectively. All 20 cities analyzed reported higher price increases year-over-year in February than January.
The South led all regions with a 28.1 percent annual increase in home prices. The Southeast was close behind, boasting a 27.9 percent annual increase. All regions posted year-over-year gains.
Home prices have surged since the start of the pandemic as buyers looked to take advantage of remote work opportunities to settle into more comfortable homes. Low inventories across the country have kept prices on the rise, as buyers have been willing to pay well above ask to win bidding wars.
A slowdown could be coming soon, though. Federal policy has led to a drastic hike in mortgage rates, which are still historically low, but rising quickly. The prospect of increasing rates puts even more pressure on potential buyers.
One sign of a shift: in the four weeks ending April 3, 12 percent of homes listed for sale had their prices reduced, according to Redfin, up from 9 percent a year earlier. It was the highest mark in four months.
“The macroeconomic environment is evolving rapidly and may not support extraordinary home price growth for much longer,” Lazzara said. “We may soon begin to see the impact of increasing mortgage rates on home prices.”