A “For Sale” sign outside a home in Atlanta, Georgia, February 17, 2023.
Dustin Chambers | Bloomberg | Getty Images
After a slowdown last year, home prices are on the rise again.
A sharp drop in new listings, adding to an already meager supply of homes for sale, is leading to renewed bidding wars and more homes being sold at above the asking price.
Home prices rose a seasonally adjusted 0.45% in March from February, according to a first look at the Black Knight Home Price Index provided exclusively to CNBC. Following revisions to January and February readings, this is now the third straight month of price increases.
In March, around 30% fewer new registrations came onto the market than before the pandemic. The deficit continues to grow as fewer potential sellers want to offer their homes with higher mortgage rates in today’s environment. This happens at the heart of the housing market in spring, when demand is historically at its highest.
“A slight increase in demand from homebuyers has led to a precipitous drop in supply for sale,” said Andy Walden, Black Knight’s vice president of corporate research. “Just five months ago, prices in 92% of all major US markets were in seasonally adjusted month-on-month declines. Fast forward to March and the situation has literally evolved 180%, with prices now up 92% of the markets as of February.”
Competition among buyers not only drives up prices, but also accelerates the market again. According to Redfin, a real estate agent, nearly half of the homes on the market are selling within two weeks, the highest proportion in almost a year.
However, national gains do not show strong regional differences in price strength and weakness. Prices in the west, where metro markets were most expensive, are a long way off their recent highs, while 40% of the other major markets have prices back to highs.
Of the nation’s 50 largest housing markets by capita, only Austin, Salt Lake City and San Antonio are seeing prices falling month-on-month. Prices in Phoenix and Dallas are flat.
The initial drop in home prices came in early summer of last year, when mortgage rates had essentially doubled in a matter of months. Interest rates are now off their recent peak, but not by much. The average interest rate on the popular 30-year fixed-rate mortgage has risen between 6% and 7%; In the early years of the pandemic, it hit more than a dozen record lows and generally hovered around 3%.
Buyers are clearly adjusting to the higher-priced environment as sales have picked up in recent months. Homebuilders have recently reported strong quarterly gains as they use incentives like mortgage rate buybacks to generate sales. Builders also have far more supply and are clearly benefiting from the lack of existing homes for sale.
A separate report released by CoreLogic on Tuesday focuses on home price comparisons from a year ago, but also shows that prices are increasing month-on-month. Nationally, prices in March were just over 3% higher than last year, but Sunbelt markets are far outpacing cities in the West and Northeast. Prices in Miami are up almost 15% year over year.
Meanwhile, according to CoreLogic, home prices in 10 states are lower than last March: Washington (-7.4%), Idaho (-3.6%), Nevada (-3.5%), Utah (-3.4%) , California (-3%), Montana (-2.3%), Oregon (-2%), Colorado (-1%), Arizona (-0.9%) and New York (-0.6%).
“The monthly rebound in house prices underscores the lack of inventory in this real estate cycle,” Selma Hepp, CoreLogic’s chief economist, wrote in a press release. “While lack of affordability in general is weighing on home price growth, mobility due to remote working conditions appears to be a current driver of home prices in some areas of the country.”