Home prices will likely continue to decrease in February because of ongoing high-interest rates and an inflation-encumbered populace. Some economists predict that Tuesday’s release of the S&P CoreLogic Case-Shiller U.S. National Home Price Index will likely show that home prices continued to recede by 0.4% in February for the eighth straight month of declines.
The Case-Shiller indicator tracks the price of single-family homes over three months in the nation’s 20 largest metropolitan areas, with April’s report indicating February’s home sales.
Here are five things to look out for from the report:
- Expect home prices to continue to decrease.
The U.S. housing market is still feeling the sting of high 30-year fixed mortgage rates that have squeezed past 7% due to the Federal Reserve’s inflation-taming rate hike campaign. These high rates attract far fewer homebuyers to the market than during the lows we saw during the pandemic. In our current reversal of circumstances, we can expect sellers to continue to lower their prices to remain competitive with each other.
- Don’t expect mortgage rates to cool down just yet.
With The Federal Reserve Chair Jerome Powell indicating at least one more rate hike in store before year-end, we won’t likely see much significant relief on 30-year mortgage rates any time soon. “While we’ve seen some modest fluctuations in mortgage rates the last few months, there’s no arguing rates are just high right now,” says Michael Gapen, Managing Director at U.S. Economics Bofa Securities. “We could see some reductions in the future depending how long of a break we get before the FED’s last rate hike, but until that happens, it might be slow going.” Currently, the 30-year fixed mortgage is trending a bit below 7%.
- West Coast housing slump to persist.
According to a new report, the Bay Area has the worst-performing housing market in the nation. Parcl Labs, which tracks the housing market, said that prices in the Bay had dropped a whopping 24% from their peak last summer and more than double the national average of 10%. With tech industry layoffs partly to blame for the declining population and market value, the Western United States has been on a losing streak these last few months.
- A spike in construction may indicate relief on the horizon.
The country’s largest public builder, D.R. Horton, far exceeded the consensus expected earnings and net sales projections. The company recorded 23,142 net sales orders and came in 17% higher than estimates. Take this as a good sign that home demand may have a hidden jump start a few months down the road. “If construction is up, that’s a good omen,” says Eliza Wingar, an economist with Bloomberg. “if houses are being built, that is a pretty good indicator of the market anticipating the end of the FEDs hikes.”
- The number of sales declined, but spring buyers may follow soon.
According to a monthly report from the National Association of Realtors, sales of previously owned homes declined 2.4% in March compared with February. With a seasonally adjusted, annualized rate, that amounts to 4.4 million units. Sales were 22% lower than in March of last year. With any luck, the number of homes sold may begin to rise as the spring home-buying season kicks in helping to exert downward pressure on prices.