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Pandemic home price boom is NOT going bust: Home prices nationwide are up 0.6% – as at least 20 large cities show modest decline of 1.1% compared to last year, fresh data shows
- Increased interest rates are yet to severely damage house prices
- However, sales volume slumped by 22 percent in March compared to last year
House prices, which sky-rocketed during the pandemic, have yet to reach the much-anticipated crash.
Some experts expected booming house prices to turn to bust after the Fed started an aggressive campaign of interest rate hikes late last year.
However, the latest data shows that prices have defied the gloomy forecast and actually rose by a modest 0.6 percent last month.
The figures from the Federal Housing Finance Agency (FHFA) show house prices across the country are up 3.7 percent compared to the same time last year.
Compared to the pre-pandemic prices of 2019 house prices remain around 40 percent higher.
House prices, that boomed under lockdown, have yet to crash after increased interest rates
House prices across the 20 US major cities experienced a slight decline of 1.1 percent in April compared to the same time last year
However, the S&P Case-Shiller monthly index of home prices in 20 large cities showed a slight decline of 1.1 percent in April compared to the same time last year, the first decline since May 2012.
Seattle, whose prices were down 12.4 percent year-on-year, reported the biggest decline, followed closely by San Francisco, which was down 11.2 percent and San Diego by 5.3 percent.
Whereas Miami, up 7.7 percent, Tampa, by 4.8 percent, and Charlotte, 4.7 percent, saw the highest annual gains.
‘Two months of increasing prices do not a definitive recovery make, but March’s results suggest that the decline in home prices that began in June 2022 may have come to an end,’ Craig Lazzara, Managing Director at S&P DJI told Trading Economics.
‘That said, the challenges posed by current mortgage rates and the continuing possibility of economic weakness are likely to remain a headwind for housing prices for at least the next several months,’ he added.
Rising mortgage rates has led to a decrease in supply of homes on the market as potential sellers are not keen to part with their cheap mortgages, fixed before the rate tightening cycle.
The number of homes sold plunged by 22 percent in March this year compared to the same month the year before, according to the National Association of Realtors.
The lack of supply may be going someway to keeping prices high, with the market at a high-price, low-sale stand off.
San Francisco and Oakland both saw price drops compared to last year going into six figures with the median value decreasing by $220,000 and $174,000 respectively, according to data released by Redfin last week.
‘Pandemic boomtowns and pricey coastal markets are seeing historic home-price declines,’ the report published on May 22 discerned.
These districts also have a high rate of crime – rates that worsened in double-digits during the pandemic and, in most cases, have continued to persist.
Higher mortgage rates have also played a part in the decreases seen in these heavily populated areas – as they continue to deter both buyers and sellers from moving forward with potential transactions.