Home prices reached a new record in March amid an ongoing housing shortage, even as high mortgage rates pushed affordability out of reach for more Americans.
Prices increased 6.5% nationally in March when compared with the previous year, the S&P CoreLogic Case-Shiller index showed on Tuesday, the same as the previous month. It marks the fastest pace of growth since November 2022.
On a monthly basis, prices climbed 0.3%, according to the index.
"This month’s report boasts another all-time high," said Brian Luke, head of commodities, real and digital assets at S&P DJI, in a release. "We’ve witnessed records repeatedly break in both stock and housing markets over the past year."
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The 10-city composite, which encompasses Los Angeles, Miami and New York, rose 8.2% annually, compared with an increase of 8.1% in February. The 20-city composite, which also tracks housing prices in Dallas and Seattle, posted an annual gain of 7.4%, which also marks an increase from the 7.3% figure recorded the previous month.
Prices rose in all of the 20 major metro markets tracked by the index.
The largest price gain once again took place in San Diego, which recorded a year-over-year increase of 11.1%. It was followed by New York and Cleveland, with respective gains of 9.2% and 8.8%.
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Denver saw the smallest gain in March, with home prices climbing just 2.1% from the prior year – the same as the previous month.
"Cities like Tampa, Phoenix, and Dallas, which saw top-tier performance in 2020 and 2021, are now growing at a slower pace," Luke said. "COVID was a boom for Sunbelt markets, but the bigger gains in the last couple of years have been the northern metro cities."
The Case-Shiller index reports with a two-month delay, meaning it may not capture the latest ongoings in the market.
There are a number of driving forces behind the affordability crisis. Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates and expensive construction materials.
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Higher mortgage rates over the past three years have also created a "golden handcuff" effect in the housing market. Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further and leaving few options for eager would-be buyers.
Economists predict that mortgage rates will remain elevated in 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic.
