What did the data show?
罢辞诲补测鈥檚 shows another steep rise in home prices, with all three indices showing an acceleration in March, a reflection of an early spring housing market in which buyers felt immense pressure to bid competitively on the few homes available for sale. Prices rose by 20.6% from a year ago in the national index, 19.5% in the 10-city index, and 21.2% in the 20-city index, (up from 20.0%, 18.7%, and 20.3% in February, respectively). Home shoppers were motivated to lock-in a mortgage rate before price increases, rising rates, or a combination of the two delivered a knockout punch to their aspirations. Mortgage rates surged 91 basis points or nearly a whole percentage point throughout the month of March, as the Fed lifted short-term rates for the first time in 2 years while the economy adjusted to lingering inflation and the then-new conflict in Ukraine.聽
Regionally, we continue to see the biggest price gains in relatively affordable Sunbelt markets. However, with lower housing costs drawing people from elsewhere and existing residents choose to stay in these areas, builders have not yet been able to keep up with demand, causing both home prices and rents to surge. According to today鈥檚 data, prices rose the most in Tampa (+34.8%), Phoenix (+32.4%), Miami (+32.0%), and Dallas (+30.7%), where home prices were more than 30% higher relative to one year ago. Highlighting how widespread housing momentum is, even the slowest markets saw double-digit price gains: Minneapolis (+12.0%), Washington, DC (+12.9%), and Chicago (+13.0%).
What does it mean for homebuyers, sellers, and the housing market?
Fast-forward to the most recent data from last week and the housing market has shifted. We鈥檝e observed a real estate refresh that has more sellers listing homes leading to greater availability of homes for sale compared to this time last year.聽 Meanwhile, mortgage rates have steadied, but remain near the highest levels in 13-years. But importantly, sales data for both new homes and existing homes signal that buyers are increasingly unable or unwilling to make a home purchase under these conditions. As buyer confidence sags and weighs down demand, real estate markets will re-balance, eventually tilting away from the heavy advantage that recent home sellers have enjoyed. This will initially mean fewer home sales, which should diminish the bidding wars and concessions that buyers make to sweeten offers.聽
Eventually we expect a more moderate pace of聽 listing price growth, with for-sale homes that sit for longer than the record pace we鈥檝e seen in recent months. Somewhat counterintuitively,聽 conditions shifting back in buyers鈥� favor will likely benefit many of today鈥檚 sellers, nearly three-quarters of whom also plan to buy a home this year. While fundamental homebuying demand is expected to remain high thanks to large numbers of young households, mortgage payments still have to be manageable. Mortgage costs are nearly 50% higher today than they were at this time last year. Unless incomes grow by double-digits or mortgage rates dip, neither of which seems especially likely, households will have to look for other options.