A new report shows that housing prices, which had been decreasing for seven months, are now starting to increase again. The S&P CoreLogic’s Case-Shiller U.S. National Home Price NSA Index released on April 25 revealed that in February 2023, home-price growth went up by 0.2 percent. This is the first increase since the summer of 2022.
Home prices are ‘moderating’
Although there was a slight rise in home prices, it ended a long streak of decreases. Craig J. Lazzara, managing director at S&P DJI, stated, “Home price trends moderated in February 2023.” The national composite, which had declined for seven consecutive months, rose modestly by 0.2 percent in February and is now 4.9 percent below its peak in June 2022. The 10 and 20-city composites had comparable performance, with both experiencing gains of 0.3 percent and 0.2 percent in February. However, it should be noted that these composites are still 6.0 percent and 6.6 percent lower than their highest points.
The Southeast region of the United States experienced the highest gains, while the West saw more declines. The national moderation trend is also noticeable at a more detailed level. February’s results were particularly interesting due to the significant regional differences.
The Fed and the housing market
Mortgage rates are going up due to the Federal Reserve’s efforts to curb inflation. The Fed has increased interest rates nine times in a row, and may do it again in May. Even though the Fed doesn’t control mortgage rates, its actions affect how much you will pay for your home loan.
Mortgage rates have gone up since the Great Recession. In 2022, rates went over 6 percent in June for the first time since 2008. They continued to increase in October, going over 7 percent. As of April 2023, the average 30-year mortgage rate is 6.61 percent.
According to Steve Reich, who is the chief operations officer of Finance of America Mortgage, the housing market is being affected by certain trends. He pointed out that the Federal Reserve’s efforts to manage inflation have caused home price appreciation to decrease. This can be attributed to higher interest rates making it more difficult for many homebuyers to afford homes, resulting in lower home sales.
The increase in interest rates worsens the housing shortage by deterring homeowners from selling, thereby reducing the availability of homes in the market.
What it means for homebuyers and sellers
According to Hamrick, both buyers and sellers should adjust to the current market situation. Prospective sellers should remain flexible on price due to the challenges brought about by the sudden rise in mortgage rates.
Hamrick advises that highly motivated individuals to buy a home should be ready for higher financing expenses. They may need to consider downsizing the home and selecting a less expensive neighborhood to make the purchase affordable.
According to Reich, buying a home in the current real estate market is still possible. As home prices become more stable, active listings stay on the market for a longer period, resulting in a less competitive market. This is good news for homebuyers who are still looking to buy a home.