Monthly home prices rise again in low-inventory market

An upward trend marks new home-price reports, as a shortage of listings drove up competition for a limited number of properties during spring buying season.

Housing costs increased on a month-over-month basis in April, according to both the Federal Housing Finance Agency and the S&P CoreLogic Case-Shiller Index.

The FHFA House Price Index reported a seasonally adjusted increase of 0.7% in April. Prices headed up for the fourth month in a row, but slowed from the 0.9% uptick a month earlier. 

Meanwhile, Case-Shiller's national index showed prices rising 0.5% nationwide on a seasonally adjusted basis, compared to 0.4% a month earlier.

"Home prices peaked in June 2022, declined until January 2023 and then began to recover," said Craig Lazzara, managing director at S&P Dow Jones Indices, in a press release. 

He noted that increases were recorded in 19 of 20 cities across the country that the company tracks.

Similarly, the FHFA said housing costs were up in all nine U.S. Census geographic divisions, ranging from an uptick of 0.1% in the Pacific division to 2.4% in New England. The Mid-Atlantic region recorded the second-fastest rate of growth at 1.4%, while prices climbed up 0.9% in the South Atlantic.

On a year-over-year basis, the pace of growth continued to decelerate from the near-record levels of early 2022 in the Case-Shiller index, with April's average home cost dropping 0.2%. The fall, which was the first decline since 2012, reflected the slowdown that occurred throughout 2022, according to CoreLogic Chief Economist Selma Hepp. One month earlier, the index had risen 0.7% on an annual basis.

FHFA's April report, though, painted a different picture, showing prices higher by 3.1% compared to a revised 0.5% in March. While both indices determine changes based on repeat sales of properties across the country, the FHFA report relies on data from Fannie Mae and Freddie Mac.

While many economists, including Hepp, expected changes in home values to eventually fall into negative territory due to higher-trending interest rates, the early-year climb up, if it continues, means they may remain there only temporarily. Monthly changes show prices could have already hit bottom and are experiencing a turnaround sooner than anticipated. 

"If I were trying to make a case that the decline in home prices that began in June 2022 had definitively ended in January 2023, April's data would bolster my argument," Lazzara said.

Some economists are striking a more cautious tone about whether the newest data is a sign of things to come. Researchers at Freddie Mac said they expect average housing costs in the next 12 months to come in below current levels, while their peers at Realtor.com also said price appreciation will be negative at the end of 2023.

Whether home values maintain their upward trajectory "will depend on how well the market navigates the challenges posed by current mortgage rates and the continuing possibility of economic weakness," Lazzara said.