Home Prices On the Rise Again Thanks to Supply Shortage

New data shows home prices have increased nationally for the second straight month.

The S&P CoreLogic Case-Shiller U.S. National Home Price index data released Tuesday shows prices on the rise, largely thanks to a low supply of homes for sale.

The index rose 0.4% in March compared to the previous month, the second month-over-month increase following seven months of declines.

The Federal Housing Finance Agency also reported this week that home prices increased 0.6% in March from the previous month, on a seasonally adjusted basis. House prices in the first quarter rose 4.3% year-over-year, and were up 0.5% from the fourth quarter of 2022.

Though rising interest rates put downward pressure on prices starting last year, higher rates “have also had the opposite effect,” according to Avery Carl, founder and CEO of The Short Term Shop, a short-term rental acquisition company.

“Higher rates have kept home sale inventory at a historic low, causing many homeowners to hang onto their properties rather than sell, as they do not want to take on a higher-interest loan to buy their next property,” Carl said.

According to Freddie Mac, the average rate on the average 30-year fixed mortgage increased again last week to 6.57% from 6.39% the week before.

“While rising interest rates initially put downward pressure on home prices, they have concurrently put downward pressure on home sale inventory. Just as new buyers are hesitant to take on higher-interest loans to acquire a property, existing property owners are hesitant to list and sell their properties in order to avoid having to take on a higher-interest loan to purchase their next property,” Carl said.

“The lack of inventory has caused prices to trend back higher because, simply put, there is very little inventory available to buy,” Carl said.

There are “stark regional differences” to the pricing picture, however.

“The farther west we look, the weaker prices are, with Seattle (-12.4%) now leading San Francisco (-11.2%) at the bottom of the league table,” Craig J. Lazzara, managing director at S&P DJI, said in a statement. “It’s unsurprising that the Southeast (+5.4%) remains the country’s strongest region, while the West (-6.2%) remains the weakest.”