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WASHINGTON — U.S. home prices reached a record high in March, reflecting the housing market's persistent affordability crisis.
The S&P CoreLogic Case-Shiller U.S. National Home Price Index, a measure of home prices across the country, jumped 6.5% in March from a year earlier to a record high. It is the sixth time the index has reached a new record high over the past year.
The report showed that there's strong demand for housing in urban population centers such as San Diego, New York, Cleveland and Los Angeles. The 20-city index rose in March at a slightly faster pace than in February.
"This month's report boasts another all-time high," said Brian Luke, head of commodities, real and digital assets, at S&P Dow Jones Indices. "We've witnessed records repeatedly break in both stock and housing markets over the past year."
In addition to unrelentingly high home prices, the housing market is also grappling with a chronic lack of homes on the market and elevated mortgage rates. Put together, it has resulted in a tough housing market, especially first-time buyers.
Persistent challenges and slight improvements
Housing affordability, which factors in incomes, home prices and mortgage rates, remains in the doldrums. But there have been some steps in the right direction recently.
The average 30-year fixed-rate mortgage fell below 7% last week after rates began to surge in mid-April. Still, mortgage rates are higher than anything seen in the decade leading up to 2022. Economists don't expect mortgage rates to decline meaningfully this year and could very well remain above 6%.
That's because inflation got stuck earlier this year, causing the Federal Reserve to push back the timing of its interest rate cut. The Fed's key interest rate is currently at its highest level in more than two decades. The central bank doesn't directly set mortgage rates, but its actions do influence them. Mortgage rates track the yield on the 10-year U.S. Treasury note, which moves in anticipation of the Fed's policy moves.
One persistent headache for buyers has been sky-high home prices. Annual home price growth is down from a record high of 20.8% in March 2022, but it has picked up steam in the past several months. Since the spring of 2022, there have only been two months in which home prices declined.
A persistent under-supply of housing is a key factor putting some upward pressure on prices, but there have been some consistent improvements this year. The National Association of Realtors reported last week that total housing inventory at the end of April was 1.21 million units, up 9% from the prior month and 16.3% higher from a year earlier. However, that is nowhere close to keeping up with demand, economists say.
