Home Prices Jump Nearly 20%, But May Be Slowing Soon
April 26, 2022
Historically low inventory and strong demand have sent home prices skyrocketing in recent months, but surging mortgage rates may begin to slow price growth in the coming months.
Home prices in February were up 19.8% from the year before, according to the S&P CoreLogic Case-Shiller national home price index. That’s an acceleration from January’s 19.1% year-over-year increase and is the third-highest reading in the index’s 35-year history.
Mortgage rates have been steadily climbing since the beginning of the year, but they did not begin sharply increasing until March. In April, they rose to the highest level since 2010. More expensive borrowing reduces buyers’ purchasing power and may push some buyers out of the market altogether.
At current rates, the monthly payment for a median-priced home with a 30-year loan is $550 higher than a year ago, an increase of 46%, according to data from Realtor.com.
Historically, pricing trends lag behind sales trends by about six months. According to the National Association of Realtors, pending home sales have declined for four consecutive months as of February, the most recent month for which data has been released, so we may begin to see prices begin to slow soon.
There are already some signs that the market is cooling. Roughly 13% of the homes on the market saw a price decrease in the past four weeks, as of April 17. That is the highest share of homes with a price reduction since last November, according to the real estate company Redfin.