Rising rates drive US home prices to 15-year high

Still no inventory relief in sight

Rising rates drive US home prices to 15-year high

Annual home price appreciation remained on fire in February, rising to its highest level in more than 15 years.

Nationwide, home prices grew at a record year-over-year rate of 11.6% in February, according to Black Knight. Moreover, daily home sales data by the company’s Collateral Analytics group showed an annual 15.9% jump in the median single-family sales price.

“Multiple years of constrained housing inventory and historically low-interest rates have helped fuel this fire to the point where nearly 75% of the 100 largest US markets have seen annual home price growth of 10% or higher,” said Black Knight data & analytics president Ben Graboske. “What’s more, Collateral Analytics’ Market Conditions Report shows the housing markets in 75% of ZIP codes rated either ‘Strong’ or ‘Hot’ based on underlying market metrics. Only 7% are characterized as ‘Normal.’

The sharp increases in both home prices and interest rates have pushed affordability to its lowest point since mid-2019. Graboske said that it now takes 20% of the median household income to make the monthly payment on an average-priced home – back to the five-year average after several years of low-interest rates mitigating the impact of rising prices on affordability.

Read more: Redfin: homebuying still a tight competition for 61% of Americans

“Housing is now the least affordable it’s been – factoring in interest rates, home prices and income – since mid-2019,” he said. “Any hopes of 2021 bringing an influx of homes to the market and lessening pressure on prices appear to be dashed for now, as new for-sale listings were down 16% and 21% year-over-year in January and February, respectively.”

There are now 125,000 fewer new listings than in the first two months of 2020, driving for-sale inventory 40% below last year’s level.

“With higher interest rates and a continuing shortage of inventory, it will be important to keep a careful eye on both home prices and affordability metrics in the coming months,” Graboske said.