Home prices gained +19.8% y/y in February as buyers tried to get out ahead of interest rate hikes.
Strongest Ever February Home Price Increase Y/Y
February’s US S&P CoreLogic Case-Shiller Index registered a new high of +19.8% y/y. This was the strongest year-over-year February increase in home price growth since this data series began in the mid-70’s. Home price growth increased +1.73% m/m, also the largest month-to-month gain in this data series.
Home price growth in February sped up as buyers wanted to get ahead of mortgage interest rate hikes.
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Now that interest rates have cracked 5% and homebuyers have less buying power, industry experts anticipate that home price growth will slow in the coming months.
All 20 Metros Analyzed Showed Stronger Annual Home Price Growth in February
The 10- and 20- city composite indexes analyzed by CoreLogic hit new highs in February. The 10-city index jumped +18.6% y/y. The 20-city index jumped even higher in February to +20.2% y/y.
Compared to peak home price gains in 2006, the 10-city index is now +36% higher while the 20-city composite index is +43% higher. When adjusting for inflation, the 10-city index is down -1% compared to 2006 and the 20-city index is up +5% to the 2006 peak.
February 2022 Home Price Appreciation by 20 Metro Areas
Phoenix, despite having the slowest monthly gains in y/y growth among all 20 metros analyzed, remained in the top slot with the strongest annual home price growth for the 32nd straight month. Take a look at all the 20 metros:
- Phoenix – +32.5% y/y
- Tampa – +32.6%
- Miami – +29.7%
- San Diego – +29.1%
- Dallas – +28.8%
- Las Vegas – +27.5%
- Seattle – +26.6%
- Charlotte – +25.5%
- Atlanta – +24.0%
- San Francisco – +22.9%
- Denver – +22.3%
- Los Angeles – +22.1%
- Portland – +19.0%
- Detroit – +14.6%
- Boston – +14.6%
- Cleveland – +13.6%
- Chicago – +13.3%
- New York – +12.9%
- Minneapolis – +12.0%
- Washington – +11.9%
Cumulatively, since the onslaught of the pandemic in March 2020, home prices have increased an average of +33%. Markets with the lowest gains in home price acceleration, Chicago, Minneapolis and Washington, have seen cumulative increases of about +21% to +23% since March 2020.
All three price tiers saw stronger annual gains in February with the high tier coming in at +2.3% and the low tier coming in at +20.6%.
Monthly Home Price Growth Averaged +1.9% for Low & +2.8% for High Tier
The middle-tier monthly home price increases averaged 2.4% in February.
With home price growth gaining and mortgage rates above 5%, monthly expenses for most potential homebuyers are higher, much higher, at about +30% y/y.
Looking at the strength of demand in high-tier price segments that are less affected by mortgage rate changes, surging markets such as Seattle, San Diego and San Francisco may, according to CoreLogic, “reflect the focus on real estate investment as a hedge against inflation.”
Cautionary Note for Sellers
Sellers would be wise to at least consider that home price growth may be at its peak. Why? Mortgage rates hit 5.37% the week of April 27, the highest level since 2009. Prices for consumer goods and services are increasing at the fastest pace in four decades and the Federal Reserve is preparing to hike interest rates by a half a point at its forthcoming meeting.
Craig J. Lazzara, managing director with the S&P DJI, said, “The macroeconomic environment is evolving rapidly and may not support extraordinary home price growth for much longer.”
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Thanks to CoreLogic.
