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Home prices continue to push higher, but at a slower pace. The S&P CoreLogic Case-Shiller U.S. National Home Price Index, which measures the price of existing homes across the nation, rose 3.9% in February from a year earlier, down slightly from the 4.1% annual gain in the previous month. On a month-over-month, seasonally adjusted basis, home prices rose 0.3%. While low affordability continues to weigh on demand, a limited supply of homes for sale is supporting the continuing price growth. New York reported the strongest gains over the year, followed by Chicago and Cleveland. Homes prices in Tampa fell 1.5% over the past year — the weakest showing in the 20 cities covered by the index. Borrowing costs are likely to stay elevated this year, which means that buyers and sellers will continue to deal with challenging conditions in the housing market.
Housing starts fell in March amid rising concerns about tariffs among builders. Total housing starts declined 11.4%, to 1.324 million annualized units. The sharp fall in March partly reflects a normalization in home building after February’s weather-driven surge. Regionally, starts fell in the South and West, which more than offset the gains in the Northeast and Midwest. Single-family starts dropped 14.2%, while multifamily starts, which are very volatile on a monthly basis, fell 3.5% during March. Single-family permits rose 1.6%, while multifamily permits increased 9.3%. The increase in building permits indicates that demand is holding up, despite questions about the White House’s trade policy and overall financial uncertainty. With mortgage rates elevated, builders have stepped up their use of mortgage rate buydowns and other incentives to soften the impact of higher rates. That said, builders are also becoming more cautious on account of rising uncertainty surrounding the impact of tariffs on the industry.
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New-home sales rebounded in March. They rose 6% to a seasonally adjusted annual rate of 724,000 units. The new-home market continues to benefit from a tight supply of existing homes for sale and the builder incentives that help make new homes more affordable for buyers. While the new-home market has been less sensitive to changes in mortgage rates, thanks to the incentives offered by builders, if mortgage rates stay above 6%, that will likely continue to discourage some buyers in the months ahead. The inventory of new homes has risen 7.9% over the past 12 months. At the current sales pace that inventory would last 8.3 months.
Existing-home sales dropped in March. Sales of previously owned homes declined 5.9%, to 4.02 million annualized units. Existing-home sales continue to run at a slow pace as buyers contend with elevated financing costs, high prices and limited inventory. Mortgage applications, which lead sales by a month or two, fell sharply in April as the 30-year fixed mortgage rate inched back up near 7%. The total inventory of existing homes on the market rose 19.8% from a year ago. This translates to just 4.0 months of supply at the current sales pace, up from 3.5 months in February.
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