April marks the third consecutive month of rising home prices: S&P Case-Shiller

The housing market experienced a peak in home prices last June, followed by a significant decline at the start of this year. However, prices are now steadily recovering.

In April, home prices were still 0.2% lower compared to April 2022, as reported by the S&P CoreLogic Case-Shiller national home price index. However, after seasonal adjustments, prices increased by 0.5% month over month. Currently, prices are just 2.4% below their peak in June 2022.

Despite this overall recovery, cities like Miami, Chicago, and Atlanta continue to see substantial year-over-year gains in April, with price increases of 5.2%, 4.1%, and 3.5% respectively. However, in 17 of the top 20 index cities, price declines were more significant in April compared to March. Boston, San Francisco, and Cleveland showed slight price increases.

There was a decline in prices due to a significant surge in mortgage rates last summer. However, although rates remain high, homebuyers are adapting to the new market conditions, leading to a strengthening of demand.

“The ongoing recovery in home prices is widespread,” stated Craig Lazzara, managing director at S&P DJI.

“April’s data would support the argument that the decline in home prices, which began in June 2022, came to an end in January 2023,” he added. “Whether this view receives further support in the coming months will depend on how well the market handles the challenges posed by current mortgage rates and the possibility of economic weakness.”

Before seasonal adjustments, prices saw an increase in all 20 cities in April, similar to what occurred in March. After seasonal adjustments, prices rose in 19 cities in April compared to 14 in March.

The average interest rate for a 30-year fixed mortgage is still hovering in the high 6% range, more than double the rate during the first two years of the Covid pandemic, which witnessed a surge in homebuying.

Despite the high rates, buyers remain active in the market. However, they face a severe shortage of available homes for sale. This scarcity can be partly attributed to the majority of homeowners having mortgages with rates as low as 3%, making them reluctant to sell and purchase another home at a higher rate.

“Home price trends are caught in a battle between stretched buyer budgets and limited inventory, resulting in fierce competition despite reduced affordability,” explained Danielle Hale, chief economist for Realtor.com. “Due to high mortgage rates preventing 1 in 7 homeowners from selling, new listings have fallen far behind historical levels, leading buyers to continue offering their best bids even though home sales are currently 20% lower compared to the same time last year.”