Rising mortgage rates did not slow down rising home prices in March.
Nationally, home prices were 20.6% higher than they were in March 2021, according to the S&P CoreLogic Case-Shiller Home Price Index. That is higher than the 20% gain in February. The index is a three-month running average ending in March.
The average rate on the 30-year fixed mortgage stood at 3.29% at the start of January and ended March at 4.67%, according to Mortgage News Daily.
The Case-Shiller’s 10-city composite rose 19.5% annually in March, up from 18.7% in February. The 20-city composite saw a 21.2% year-over-year gain, up from 20.3% in the previous month. For both national and 20-city composites, March’s reading was the highest year-over-year price change in more than 35 years of data.
Regionally, Phoenix slipped from the top gainer spot for the first time in three years, with Tampa taking over. Tampa, Phoenix and Miami continued to see the highest annual gains, with increases of 34.8%, 32.4% and 32.0% respectively. Seventeen of the 20 cities reported higher price increases in the year ending March 2022 versus the year ending February 2022.
“Those of us who have been anticipating a deceleration in the growth rate of U.S. home prices will have to wait at least a month longer,” says Craig Lazzara, managing director at S&P DJI. “All 20 cities saw double-digit price increases for the 12 months ended in March, and price growth in 17 cities accelerated relative to February’s report.”
Cities seeing the smallest price gains, albeit still in double digits from a year ago, were Minneapolis (+12.4%), Washington (+12.9%) and Chicago (+13%).
The expectation is that prices will begin to ease, since home sales have been falling now for several months. Demand, however, is still high, and real estate agents report that they are still seeing multiple offers for homes that are priced well. More supply is also coming on the market, as sellers worry they will miss out on the last days of the hot market.
“Mortgages are becoming more expensive as the Federal Reserve has begun to ratchet up interest rates, suggesting that the macroeconomic environment may not support extraordinary home price growth for much longer. Although one can safely predict that price gains will begin to decelerate, the timing of the deceleration is a more difficult call,” added Lazzara.