Home prices grew for the third straight month in April, potentially cementing a recovery in values and reflecting a housing market that is sorely undersupplied.
The S&P CoreLogic Case-Shiller US National Home price index increased by 0.5% in April on a seasonally adjusted basis compared with the previous month, according to data released Tuesday. The index that tracks housing prices in the 20 biggest metros showed prices in April rose 0.9% on a seasonally adjusted basis over March, better than the 0.35% gain expected by economists surveyed by Bloomberg.
Similarly, the Federal Housing Finance Agency reported Tuesday that average US home prices grew 0.7% month over month in April on a seasonally adjusted basis.
“The U.S. housing market continued to strengthen in April 2023,” said Craig J. Lazzara, managing director at S&P DJI, said in a press statement. “Home prices peaked in June 2022, declined until January 2023, and then began to recover.”
The monthly gain in prices further challenges buyers who must either bid up the few options on the resale market or turn to higher-priced new builds. But homeowners are able to recoup some of their recent equity losses.
"On a month-over-month basis, house prices have been re-accelerating for the past three months," Mark Fleming, First American's chief economist, told Yahoo Finance. "This is good news for homeowners gaining more equity, but it will pressure affordability for the potential first-time homebuyer."
Year over year, though, the S&P CoreLogic Case-Shiller national index recorded a 0.2% annual decline in April — the first time since April 2012 — while the 20-city index registered a 1.7% decline, again better than the 2.6% drop economists expected.
The index uses the repeat sales method to measure home price growth. This method tracks data on properties that have sold at least twice to more accurately calculate the change in each home's value.
The cities that registered the largest price increases versus last year were Miami, Chicago, and Atlanta, with annual gains of 5.2%, 4.1%, and 3.5%, respectively.
The Southeast again was the nation's strongest housing region, with values there growing 3.6% in April, according to the S&P CoreLogic Case-Shiller index.
“The ongoing recovery in home prices is broadly based,” Lazzara said, “Before seasonal adjustments, prices rose in all 20 cities in April (as they had also done in March). Seasonally adjusted data showed rising prices in 19 cities in April (versus 14 in March).”
Still, Seattle and San Francisco recorded annual price drops of 12.4% and 11.1%, respectively. Prices in the West region overall fell 6.9%, the worst-performing region, according to the S&P CoreLogic Case-Shiller index.
So far, the reversal in prices appears to be sticking even though mortgage rates remain elevated.
“Home price trends are caught in a tug of war between stretched buyer budgets and limited inventory forcing competition despite reduced affordability,” Danielle Hale, Realtor.com’s chief economist, said in an email to press.
The latest price data on Tuesday “reinforced the idea that home prices are responsive to interest rate adjustments, as home shoppers continue to push budget boundaries in today’s pricey housing market,” she added.
For instance, in April, rates stayed below 6.5% the entire month. That helped to push up sales for new homes during that month, while existing home sales remained flat.
But rates didn’t soften enough to convince many homeowners to list their homes. Nearly 90% of homeowners are locked into rates under 6%, and many feel handcuffed to their current homes. Selling a home in today’s environment means trading in a historically low mortgage rate for one that is twice as expensive.
In May, for instance, there was a record low number of previously-owned homes on the for-sale market, according to the National Association of Realtors, especially as rates pushed higher, nearing 7%. So with buyers vying for limited choices, that’s propped up prices.
In fact, James Egan, a strategist at Morgan Stanley, last week revised his forecast for home prices for the year, jettisoning his previous estimate of a 4% decline and instead calling for prices to remain flat.
“While we continue to believe that year-over-year home price growth will turn negative next month, we expect the time below zero will be short,” Egan wrote at the time, correctly forecasting the annual decline. "We think there is more room to the upside in our home price forecasts than the downside.”
That’s good news for homeowners with mortgages — about 63% of all properties — who lost equity year over year for the first time since early 2012 in the first quarter, according to CoreLogic. Still, home equity was up from the fourth quarter — rising to $274,000 per average owner from $270,000 — tracking with the nascent recovery.
“Home equity trends closely follow home price changes,” CoreLogic Chief Economist Selma Hepp said in a statement. “As a result, while the average amount of equity declined from a year ago, it increased from the fourth quarter of 2022, as monthly home prices growth accelerated in early 2023.”
CoreLogic expects further home price growth, forecasting housing values will increase 4.6% year-over-year by March of next year, recovering another $12,600 in equity for the average homeowner.
“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," Lazzara said. "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.”
Editor's note: A previous version of this article published the non-seasonally adjusted numbers, rather than the seasonally-adjusted ones.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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