U.S. home prices increased month over month from January to March, according to a new report, gaining momentum into the spring home-buying season.
Home prices rose 0.45% in March from February, according to mortgage technology and data provider Black Knight, marking the strongest single-month gain since last May.
The firm also revised February’s monthly growth in prices higher to 0.43% from 0.16%, and reversed its previously reported 0.13% decline in January to a 0.13% month-over-month gain. Prices now are just 1.7% off their June 2022 peak.
The uptick in home prices is another troubling development for buyers, who are already facing acute inventory shortages and higher mortgage rates as they reenter the market.
“A modest bump in homebuyer demand ran headlong into falling for-sale supply, leading to the third consecutive monthly increase in home prices after they’d been pulling back from recent peaks through the tail end of 2022,” Andy Walden, Black Knight’s vice president of enterprise research strategy, said in a statement. “Just five months ago, prices were declining. Fast forward to March, and the situation has done a literal 180.”
Inventory woes push home prices higher
Sales activity rose for the second consecutive month in March, with seasonally adjusted volumes up 13% from January’s low, Black Knight found. While that demand is lower than pre-pandemic, worsening inventory challenges created a difficult environment for buyers.
For instance, new listings were 30% below pre-pandemic levels in March, a deterioration from February and January, which saw listings 27% and 25% lower than pre-Covid norms, respectively. As a result, active for-sale inventory dropped for the sixth month in a row in March, its lowest level since April of last year.
Overall, inventory sat at 2.6 months of supply, “tipping the scale back toward sellers in a tightly constricted market,” Walden said.
What’s behind the for-sale shortage? Higher mortgage rates, which are keeping potential move-up sellers stuck in place.
A separate study from Realtor.com found that 82% of would-be sellers felt trapped by their current low mortgage rate. The trend is helping to keep housing prices high and inventory supply strained for the foreseeable future.
Where home prices are increasing the most
At the metro level, 92% of the nation’s major markets experienced month-over-month home price growth in March, Black Knight found.
The largest price gains occurred in the Midwest and Northeast, with Columbus (+1.1%), Hartford (+1.0%), Cleveland (+1.0%), Cincinnati (+0.9%), Baltimore (+0.9%) leading the pack with the largest increases.
The only markets where prices were falling at a seasonally adjusted rate were Austin (-0.7%), Salt Lake City (-0.12%), and San Antonio (-0.07%), with Phoenix and Dallas remaining flat in March, the report found.
Year over year, home price growth continues to decelerate “as the influence of the red-hot spring 2022 market fades in the rearview mirror.”
“Prices are now up just 1.0% year over year, with the annual growth rate on track to fall to roughly 0% by April,” Walden said. “That said, low inventory levels will limit just how far that metric will fall in coming months.”
Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
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