The real estate market is showing strong signs of recovery this spring, as home prices soar despite affordability challenges caused by higher mortgage rates. According to the latest S&P CoreLogic Case-Shiller Indices report, the housing market is regaining its footing after a challenging winter.
In April, home prices across the U.S. experienced a modest 0.2% annual decline. However, on a monthly basis, prices surged by an impressive 1.3%, indicating a promising rebound. Even high-tier homes witnessed price increases, defying concerns about affordability in a rising interest rate environment.
George Ratiu, Chief Economist at Keeping Current Matters, stated, “Today’s S&P CoreLogic Case-Shiller Index highlighted a spring housing market regaining its footing after a winter of dire forecasts. While headlines of six months ago called for a sustained buyer pullback, accompanied by significant price declines due to the sharp rise in interest rates, the spring market saw demand rebound.”
Strong Price Gains in Key Cities
The recovery is not confined to a few areas; the 10-city and 20-city composites both saw monthly gains of 1.7%. Notably, Miami, Chicago, and Atlanta led the charge with the largest price increases. Some markets that faced weakness during the pandemic are now showing robust price gains, particularly Boston, as stated by Selma Hepp, Chief Economist at CoreLogic.
Optimistic Projections for Home Prices
The surge in home prices, averaging 1% monthly, suggests that the market has bottomed out and is now trending upward again. CoreLogic’s latest Home Price Index predicts that home prices nationally will see an average increase of 4% in 2023 compared to the previous year.
Craig Lazzara, Managing Director of S&P Dow Jones Indices, commented, “If I were trying to make a case that the decline in home prices that began in June 2022 had definitively ended in January 2023, April’s data would bolster my argument. Whether we see further support for that view in coming months will depend on how well the market navigates the challenges posed by current mortgage rates and the continuing possibility of economic weakness.”
Affordability Concerns and Market Stability
Despite the improvement, affordability remains an issue due to high mortgage rates. However, the fear of significant price dips has diminished, thanks to a lack of housing supply, which has helped maintain market stability. The National Association of Realtors (NAR) reported that housing supply in the first quarter averaged 1.63 million listings, a 40% reduction from the first quarter of 2019.
Selma Hepp noted, “While elevated mortgage rates have dampened home price growth and even led to declines in some areas, a lack of inventory continues to keep a floor under prices. The remainder of the year is likely to continue to reflect these trends, suggesting that 2023 home buying activity may be the slowest in about a decade, though price growth may return to long-term trends in most markets across the country.”
Home Equity Boosts Price Appreciation
On a positive note, the accumulation of home equity is supporting price appreciation, particularly in areas attracting baby boomers for retirement. With an average of over $270,000 nationally and more than $1 million in some high-cost regions, home equity is playing a pivotal role in driving prices higher.
Tips for Homebuyers and Refinancers
For those looking to take advantage of favorable interest rates, it’s wise to shop around for the best mortgage deals. Credible is an excellent platform to compare multiple mortgage lenders at once and secure the most suitable rate.
Additionally, if you’re looking to reduce monthly expenses, consider refinancing your home loan. Refinancing can help lower your monthly payment, potentially saving you significant money in the long run.
The spring housing market’s resurgence is indeed promising, but it’s essential to stay vigilant and make informed decisions in the face of ongoing economic challenges and fluctuating mortgage rates.
Download our app MadbuMax on the Apple App Store for the latest news and financial tools. Interested in getting your finances in order do not forget to check Dr. Paul Etienne’s best-seller book on personal finance. To access more resources, tools and services please click here. Also do not forget to follow Dr. Etienne on IG or Twitter.
