By Natalie Mojica
The S&P CoreLogic Case-Shiller U.S. National Home Price Index revealed that home prices rose 19.2% in January since the year before, higher than the 18.9% annual increase in December.
Phoenix, Tampa, and Miami were among the 20 cities with the highest annual gains. In Phoenix, home prices were 32.6% higher than the year before, while Tampa had a 30.8% increase, and Miami had a 28.1% increase.
Evidence showed that price growth is strongest in the South, but there have been gains in every region throughout the country. Washington, D.C., Minneapolis, and Chicago were the cities with the smallest annual gains, but they were still up significantly from the year before.
“The macroeconomic environment is evolving rapidly,” Craig J. Lazzara, the managing director at S&P Dow Jones, said. “Declining Covid cases and a resumption of general economic activity has stoked inflation, and the Federal Reserve has begun to increase interest rates in response…we may soon begin to see the impact of increasing mortgage rates on home prices.”
While the data indicated the housing market had a strong start with buyers motivated to find a home before mortgage rates increase, experts like George Ratiu, a senior economist at Realtor.com, warned that many factors have changed since January. Most notably, Russia’s invasion of Ukraine has impacted global trade and led to disruptions in supply chains.
Inflation rose to levels unseen since the 1980s, which has made the Federal Reserve increase the federal funds rate and use “aggressive monetary tightening in the coming months,” Ratiu said, indicating a large impact on the real estate market will happen soon.
Even if buyers remain interested in purchasing homes, as the mortgage rate increases toward 5%, the ability to qualify for a loan will become more difficult. Higher mortgage rates have already affected sales within the first months of the year. Pending home sales were down 4.1% month-over-month as of February 2022, according to the National Association of Realtors. The monthly payment for a median-priced home has increased 30% in the past year, much faster than other consumer prices, which are comparably only up 8% from the past year.
“For sellers, April offers the ideal combination of higher prices and still-limited competition from other homeowners that typically ensure a successful close,” Ratiu said.
