There’s more bad news for potential homebuyers: Prices just hit another record

There’s more bad news for potential homebuyers: Prices just hit another record

KZXPjKxu cnn L19jb21wb25lbnRzL2ltYWdlL2luc3RhbmNlcy9jbHU4ZHp5MWQwMDBsMzU2aDFmcXV1dGJx

Originally Published: 26 MAR 24 09:33 ET

Updated: 26 MAR 24 11:46 ET

By Alicia Wallace, CNN

(CNN) — US home prices rose at the fastest clip in months to a fresh record high in January, according to data released Tuesday, highlighting how a housing shortage combined with high mortgage rates continues to limit affordability.

The S&P CoreLogic Case-Shiller US National Home Price index rose 6% in January from a year before, accelerating from a 5.6% annual increase in December. It’s the highest annual increase since late 2022.

“For the second consecutive month, all cities reported increases in annual prices, with San Diego surging 11.2%,” wrote Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, in a statement.

“On a seasonal adjusted basis, home prices have continued to break through previous all-time highs set last year,” he noted.

Housing prices have shot to new heights amid a confluence of factors; specifically, decades of underbuilding has led to a shortage of millions of homes. In recent years, efforts to boost that inventory were stymied by rising costs as well as sharply rising interest rates.

The Federal Reserve’s series of rate hikes meant to curb demand and slow inflation resulted in average mortgage interest rates surging to nearly 8% last year. The higher rates stifled demand and kept homesellers on the sidelines, limiting supply further.

The 30-year fixed-rate mortgage averaged 6.87% in the week ending March 21, according to Freddie Mac data.

It’s more affordable to rent than to buy

Mortgage rates are expected to drop further this year — especially if the Fed starts cutting rates as planned — however, they might not fall by much: Economists at PNC Financial Services group expect them to be in the 6.5% realm by the fourth quarter.

“That means housing affordability will still be low this year,” Ershang Liang, economist at PNC Financial Services Group, told CNN.

In fact, a separate report released Tuesday showed that it’s actually more affordable to rent than to buy in America’s biggest cities.

Realtor.com’s Rental Report for February found that monthly rent was cheaper than shelling out for a mortgage payment in the 50 largest US cities.

In February, the cost of buying a starter home in those cities was $1,027 more than renting one. That’s up from a difference of $865 in February 2023.

Austin, Texas; Seattle; Phoenix; San Francisco; and Los Angeles were the top five metros with the largest rent versus buy savings, according to the Realtor.com report.

High rates weigh heavily in many metro areas

In California, it’s no surprise that cities facing the biggest housing shortages are seeing some of the sharpest home price gains, said Liang.

“(In Los Angeles and San Diego), a new single-family permit is issued for every 11 new jobs, so we are seeing strong employment growth in those places, but the pace of single-family homes has not been able to keep up with the employment gains there,” she said.

However, decades-high interest rates and borrowing costs weighed on some price growth — especially for homes sold in the nation’s largest metro areas, according to the report.

On a month-over-month, seasonally adjusted basis, prices rose 0.4%. The S&P CoreLogic’s 20-City Composite index inched up by 0.1%, the slowest pace since February last year.

“The key number is the small month-over-month gain,” Robert Frick, Navy Federal Credit Union’s corporate economist, wrote Tuesday. “If the trend continues, we could see prices start to fall; though, unfortunately, we’re a year away from seeing home prices drop nationwide, in the best case.”

When stripping out seasonal adjustments, 17 of the 20 metro areas recorded price declines from December to January. San Diego, Los Angeles and Washington, DC, registered positive gains. Minneapolis home prices have declined 2.4% during the three months ended in January, according to the report.

Cities like Phoenix, Dallas and Denver that have been seeing slower price growth, or even falling prices on a monthly basis, are likely experiencing a correction after previous years of sharply rising prices, Liang said.

The-CNN-Wire
™ & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

The post There’s more bad news for potential homebuyers: Prices just hit another record appeared first on KVIA.

Texas News