U.S. Home Prices Rise for First Time in 8 Months, Case-Shiller Says

The numbers: Low inventory and high demand from home-buyers pushed up U.S. home prices in February.

The S&P CoreLogic Case-Shiller 20-city house price index rose 0.1% in February, as compared to the previous month. This is the first time home prices have risen in 8 months.

Despite weakness on the west coast, home prices are up overall as the Sun Belt continues to see strong home price appreciation.

All numbers are seasonally adjusted.

Year-over-year prices rose 0.4%, but the appreciation slowed from a 2.6% increase in the previous month. The 20-city index peaked in June 2022.

A broader measure of home prices, the national index, rose in February by 0.2%, and was up 2% over the past year. The annual increase is the smallest in 11 years–since 2012.

Key details: Miami, Tampa and Atlanta continue to lead the highest year-over-year gains among the 20 cities in February.

Cities on the West coast continue to see weak home-price growth, from Las Vegas to San Francisco. Home prices in San Francisco are down 10% from last February.

A separate report from the Federal Housing Finance Agency showed home prices rising in February, up 0.5% from the prior month.

And over the last year, the FHFA index was up 4%.

Big picture: In spite of mortgage rates rising and an uncertain economic climate, home prices are still up for two reasons: a lack of inventory, and strong growth in the Sun Belt.

A low number of homes for sale has brought back bidding wars in some parts of the country. And in the Sun Belt, strong demand continues to keep prices from falling. Home prices in the region grew by 7.8% in the Southeast alone, S&P said.

But other parts of the country, particularly the expensive West Coast markets, are seeing falls in prices. The entire region saw home prices fall by 4.2%, S&P said.

What S&P said: “The results released today pre-date the disruptions in the commercial banking industry which began in early March,” Craig J. Lazzara, managing director at S&P DJI, said.

“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,” he added.

As a result, “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,” Lazzara said.

What are they saying? The index posting a gain after seven months of decline is “suggesting that home prices nationally have bottomed out,” Selma Hepp, chief economist at CoreLogic, said in a note.

“Even in markets with the largest price drops since last year’s peaks, such as San Francisco, home prices picked up pace in February,” she added.

The pickup in home prices show that “the housing market is stabilizing,” and “while this is good news from an economic standpoint, this continues to be bad news for the Federal Reserve’s attempt to cool down the U.S. housing market,” Giampiero Fuentes, economist at Raymond James, wrote in a note.

“Although higher mortgage interest rates have weakened the U.S. housing market, the effects on home prices are still limited, which continues to support our view that this will keep the Fed from relaxing monetary policy for longer than markets are anticipating,” he added.

Market reaction: Stocks were mixed in early trading on Tuesday. The yield on the 10-year Treasury note fell below 3.4%.

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