U.S. home prices will decline less than previously expected this year. Home prices in March were 0.7% higher than March 2022, the S&P CoreLogic Case-Shiller Home Price Indices (the leading measures of U.S. residential real estate prices) said Tuesday. A different report from the Federal Housing Finance Agency also showed home prices rising in March, up 0.6% from February. If you’re on the market for a new house, here’s what these numbers mean for you.
What the housing market looks like right now
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March’s results suggest that the decline in home prices that began in June 2022 may have come to an end. “Two months of increasing prices do not a definitive recovery make,”said Craig J. Lazzara, managing director at S&P DJI in this week’s release. “The challenges posed by current mortgage rates and the continuing possibility of economic weakness are likely to remain a headwind for housing prices for at least the next several months,” he added.
For now, higher prices are here to stay. This is in combination with widespread expectations interest rates will remain high, according to Reuters. These steep mortgage rates are discouraging sellers from giving up their current rates, leading to lower supply and increased competition among buyers. In other words, it’s Econ 101: As long as supply is low and demand is high, home prices will stay high too.
At the same time, those high mortgage rates could restrict demand, as prospective buyers no longer even consider purchasing a home in the current market. For context, the rate for the 30-year mortgage in May is still over 7%. And as we’ve previously explained, know that your mortgage rate makes a huge difference as to whether or not you can afford your monthly payments. As ABC News explains, these rates (combined with higher home prices) mean that mortgage payments are up hundreds of dollars.
To find out how much this higher rate will impact your monthly payments, you can experiment with an online mortgage calculator. For more, here are our seven deadly sins of buying your first house.