U.S. Home Prices Rise 2% in February 2023, Sparking 9.6% Surge in March Home Sales

In February 2023, U.S. home prices increased by 2%, a slowdown compared to January's 3.7% gain, according to the S&P CoreLogic Case-Shiller Index, a trusted gauge of the housing market.

This deceleration in price growth contributed to a surge in home sales in March, especially in key markets.

Highlights

• National home prices posted modest growth in February 2023.
• Miami, Tampa, and Atlanta led with the highest year-over-year price increases.
• Newly built single-family home sales jumped 9.6% in March 2023.

The Case-Shiller 10-city composite index showed a 0.4% annual increase in February, down from 2.5% in January. Similarly, the 20-city composite index rose 0.4% year-over-year, a decrease from January’s 2.6%. All 20 cities reported lower year-over-year price growth compared to the previous month.

Miami topped the list with a 10.8% year-over-year price rise, followed by Tampa at 7.7%, and Atlanta at 6.6%. Conversely, tech-centric cities in the western U.S. experienced the largest price declines.

The National Composite home price index, which had fallen for seven months straight, edged up 0.2% in February but remains 4.9% below its June 2022 peak. Year-over-year, it stands 2% higher than February 2022 levels, according to Craig J. Lazzara, Managing Director at S&P DJI.

City-level data also reflected this trend, with 12 cities seeing price increases in February before seasonal adjustment, compared to just one in January. Seasonally adjusted figures showed nine cities with rising prices versus five the previous month.

These February figures precede the banking sector turmoil in March, yet homebuyers remain attentive to Federal Reserve policies on interest rates.

Lazzara notes, "While forecasts vary, the Federal Reserve appears committed to its inflation goals, suggesting interest rates could stay elevated in the near term." This environment, coupled with economic uncertainties, is likely to continue pressuring housing prices in the months ahead.

The cooling of home price growth and price declines in some areas may have encouraged a rebound in March home sales. The U.S. Census Bureau reported a 9.6% increase in new single-family home sales in March, though sales remain 3.4% below March 2022 levels. The median sale price rose to $449,800 in March from $438,200 in February.

Inventory levels tightened slightly in March, signaling increased buyer activity as mortgage rates gradually decline. New home supply now represents 7.6 months of inventory at the current sales pace, down from 8.2 months in February.

Federal Housing Finance Agency data aligns with these trends, showing a 0.5% rise in home prices from January to February and a 4% year-over-year increase in February 2023.

Dr. Nataliya Polkovnichenko, Supervisory Economist at FHFA, attributes this growth partly to mortgage rates dropping more than half a percentage point since their early November peak, alongside historically low housing inventory.

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