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U.S. home prices have been accelerating for 4 straight months. Will it ever end?

SHARE U.S. home prices have been accelerating for 4 straight months. Will it ever end?
A “For Sale” sign is posted in the yard of a house in Sandy, Utah.

A “For Sale” sign is posted in the yard of a house in Sandy on Tuesday, May 31, 2022. U.S. home prices have appreciated for the fourth straight month, according to Bloomberg.

Chuck Wing, Deseret News

Home price increases in 20 major cities across the U.S. have continued to accelerate for four straight months — even as homebuyers feel the bite from high mortgage interest rates.

That’s according to the latest S&P CoreLogic Case-Shiller Index report, which showed Tuesday all 20 cities included in the index saw double-digit price increases for the year that ended in March. Home prices in those cities climbed 21.2% year-over-year in March, even after February brought price increases of 20.3%.

Cities with highest price growth: For the first time in almost three years, the western city of Phoenix was surpassed as the city with the most rapid growth in housing prices, according to Craig J. Lazzara, managing director at S&P Dow Jones Indices.

The new top city is in Florida, where the housing market continues to rage.

“In March, Tampa led all cities with a gain of 34.8%, with Phoenix (32.4%) and Miami (32%) taking silver and bronze honors,” Lazzara said in a statement.

When will home prices stop going up? That’s the million-dollar question for would-be homebuyers wondering if they should bite the bullet now or wait it out.

As housing experts and economists monitor the market — some warning of overvaluation and some seeing early signs of the market cooling due to the pinch from rising mortgage rates — the latest S&P CoreLogic Case-Shiller report shows price increases have yet to slow.

  • “Those of us who have been anticipating a deceleration in the growth rate of U.S. home prices will have to wait at least a month longer,” Lazzara said.

As the Federal Reserve continues to battle inflation, rising interest rates have pushed mortgage rates higher. In high-growth, high-demand places like Utah, those rate increases have pushed monthly mortgage costs up roughly $1,000. Combined with still-escalating home prices, the prospect of owning a home is increasingly out of reach for more and more would-be buyers.

But if higher interest rates are meant to cool demand and throw water on today’s housing market, why are prices still so high? Matthew Pointon, a senior property economist at Capital Economics, explained in a report to clients Tuesday, Bloomberg reported.

  • “The strength of house prices may come as a surprise given the surge in mortgage interest rates over the past couple of months,” Pointon said. “But note Case-Shiller takes an average of the price of homes sold over the previous three months (i.e. January to March), and back then, home demand was still strong.”

While the past four months continued to mean double-digit price increases for U.S. housing, Lazzara warned we may see prices decelerate in the future. But the question remains — when?

  • “Mortgages are becoming more expensive as the Federal Reserve has begun to ratchet up interest rates, suggesting that the macroeconomic environment may not support extraordinary home price growth for much longer,” Lazzara said. “Although one can safely predict that price gains will begin to decelerate, the timing of the deceleration is a more difficult call.”

But remember, price growth deceleration does not necessarily mean price drops. Prices could continue to climb — just not at such a dramatic rate — if inventory remains an issue. With the U.S. housing market’s inventory still looking tight, Pointon said outright price drops are unlikely, Bloomberg reported, and he expects yearly price growth to slow to around 9% by the end of the year.