In late 2022, when home prices leveled off in the face of rising mortgage rates, many prospective homebuyers hoped for a major housing market correction. Many “experts” on YouTube have been predicting a market crash for months.
So far, it hasn’t happened. In fact, one industry report says prices in many areas of the country are still going up, even while sales decline.
The S&P CoreLogic Case-Shiller Indices, a thorough but lagging indicator of U.S. home prices, shows home prices recovered in March in all 20 major metro markets it monitors. Prices were up over February but down compared to March 2022. But there were plenty of exceptions.
Miami, Tampa, and Charlotte reported the highest year-over-year gains among the 20 cities in March. Miami led the way once again with a 7.7% year-over-year price gain, followed by Tampa in second with a 4.8% increase, and Charlotte replacing Atlanta in third with a 4.7% increase.
Prices are down in the most expensive markets
The cities where prices have fallen tend to be markets where prices have increased the most over the last couple of years. There are 19 of 20 cities reporting lower prices in the year ending March 2023 compared to the year ending February 2023, but even Chicago showed a small increase in March.
So why are prices going up again when the economy is slowing and mortgage rates remain above 6%? Housing experts say the answer is simple – it’s supply and demand.
Yes, it’s more expensive now to buy a home but there appear to be more people willing and able to buy than there are available homes. Greg McClure, a Realtor with Realty ONE Group in Sacramento, says that’s the case in his market.
“Sales are trending up, home prices are trending up but inventory will remain an issue through the rest of the year,” McClure recently told us.
Buyers face more competition
The lack of inventory means there is more competition among buyers. Homes don’t remain on the market for very long and sellers sometimes get multiple bids, even in this high interest rate environment.
The National Association of Realtors (NAR) reports sales of existing homes dropped 3.4% in April but the median price declined only slightly. In many markets, it went up.
"Roughly half of the country is experiencing price gains," said Lawrence Yun, NAR’s chief economist. "Even in markets with lower prices, primarily the expensive West region, multiple-offer situations have returned in the spring buying season following the calmer winter market. Distressed and forced property sales are virtually nonexistent."
Housing experts say this situation exists largely because the pace of building new homes has slowed considerably for more than a decade. New single-family home construction peaked in 2006 and hasn’t approached that level over the last 17 years.
