The spring home-buying season is in full swing and it started off with a bang.
Home prices increased in February to a new high for the fourth consecutive month, according to the S&P CoreLogic Case-Shiller Indices, released Tuesday by S&P Dow Jones and CoreLogic.
And another release Tuesday from the Federal Housing Finance Agency showed home prices rose 6.4% annually and 0.2% from the prior month.
But these rising home prices didn’t hold back new home sales, which increased a full 5.8% monthly and 15.6% annually, according to Tuesday’s release from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
“The 2017 spring home shopping season has started off with a bang, and at this point the strength of the market shouldn’t come as much of a surprise,” Zillow Chief Economist Svenja Gudell said. “February Case-Shiller numbers point to more fierce competition in the housing market.”
“The thing to watch for now is when market conditions will shift, and change does seem to loom on the horizon, with rising mortgage interest rates and flattening rents,” Gudell said. “Both could put a dent in home-buyer demand and overall price growth and affordability.”
Another expert confirmed that the market is strong for now, but explains high home prices and low inventory create significant headwinds for first-time homebuyers.
“Strong demand bolstered by income and job growth sets the stage for intense competition and continued price growth in the housing market,” Trulia Senior Economist Cheryl Young said.
“Consumers are likely to also take advantage of mortgage rates as they remain low,” Young said. “While the housing market looks to be recovering, these high prices impact the affordability of homes, directing the strongest headwinds towards starter-home buyers.”
“The good news is that new home sales jumped for the third month in a row, to about the same as last year’s peak in July,” realtor.com Senior Economist Joseph Kirchner said. “Already this spring market is challenging last year’s high-water mark.”
“The bad news is that sales are increasingly concentrated at the mid- to upper-end of the price range,” Kirchner said. “Sales of affordable new homes under $200,000 dropped to 12% from 17% of the market since last April.”