S&P Global’s CoreLogic Case-Shiller home price index report for February was released today, and the results were… surprisingly good! Indeed, national home prices increased in February after seven straight months of declines. So, is the housing market crash canceled?
Well, maybe. Despite projections of a flat February for home prices, the national index rose 0.2% in February, representing a 2% increase over the past year. This represents the smallest annual jump in 11 years, although it snapped a seventh-month losing streak for the metric. Even the 10-and-20-city home price indices increased by 0.3% and 0.2% in February, respectively.
Prices rose in 12 cities in February, compared to just one in January, sparking speculation that the previous downtrend in real estate prices may be starting to subside. However, that isn’t to say the housing industry doesn’t still have some roadblocks ahead of its return to normality.
“The results released today pre-date the disruptions in the commercial banking industry which began in early March,” said Craig J. Lazzara, managing director at S&P Dow Jones Indices.
“Although forecasts are mixed, so far the Federal Reserve seems focused on its inflation-reduction targets, which suggests that interest rates may remain elevated, at least in the near-term. Mortgage financing and the prospect of economic weakness are therefore likely to remain a headwind for housing prices for at least the next several months.”
While it feels weird to pop champagne after such a meager gain in home prices, it’s undeniably a promising sign for the industry amid seemingly constant fears over a potential housing market crash.
Housing Market Makes Gains on Easing Mortgage Rates
It seems February’s jump in home prices resulted from easing mortgage rates. Mortgage rates fell from mid-November through early February before once again climbing. This may have brought buyers, at least temporarily, back into the market, a change reflected by higher existing-home sales and, as per today’s Case-Shiller report, home prices.
While the demand for housing has sunk in the face of rising mortgage rates, home prices, and inflation, some mechanisms have seemingly prevented home prices from undergoing the sort of “housing crash” some have projected. Indeed, some analysts expect house prices to fall from 12% peak to trough, something that’s clearly still far off. Currently, home prices are down less than 3% from their summer 2022 high, hardly the stuff of realtors’ nightmares.
“It’s too early to declare the home sales recession over, but the decline in mortgage rates allowed buyers to dip their toes back in the market as did the cheaper prices,” Christopher Rupkey, chief economist at FWDBONDS, told Reuters.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
