Home prices continue to march higher this year, despite pressure from increasing mortgage rates.

National home prices rose 6.4% annually in February, according to data from the S&P CoreLogic Case-Shiller Home Price Index released Tuesday. That was the largest year-over-year rise since November 2022.

Among the 20 cities tracked, San Diego had the highest year-over-year price jump in February, at 11.4%, followed by Chicago and Detroit, both with increases of 8.9%.

The report tracks single-family home prices across December, January, and February, when mortgage rates dipped to 6.6%. More recently, average rates for 30-year fixed mortgages jumped to 7.17% for the week ending April 25, according to Freddie Mac.

In a note, Capital Economics property economist Thomas Ryan said that “the substantial shortage of existing homes for sale” fueled February’s gains in home prices.

“Looking ahead, while still high mortgage rates will prevent a house price boom, we think the combination of tight supply and rising buyer demand will deliver a few more years of solid house price growth,” added Ryan. He is forecasting annual home price growth of 5% through this year and 3% in 2025.

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Where are home prices rising the fastest?

For the second straight month, all 20 metros tracked by the index saw annual home price increases. In four cities, prices hit all-time highs as tracked by the index: San Diego, Los Angeles, Washington DC and New York.

Nearly every city also posted monthly price growth on a seasonally adjusted basis. The one exception was Tampa, FL, where home prices dipped 0.3% on the month, but remained up 4.2% from one year ago.

“Homeowners most likely saw healthy gains in the last year, no matter what city you were in, or if it was in an expensive or inexpensive neighborhood,” said Brian D. Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, in a statement. “On a seasonal adjusted basis, home prices have continued to break through previous all-time highs set last year.”

Following San Diego, Chicago, and Detroit, the cities with the largest annual price increases were Los Angeles and New York. In both cities, prices went up by 8.7% in February. Charlotte, NC, followed with a year-over-year increase of 8.2%.

“The Midwest and Northeast remained popular with homebuyers, which kept prices climbing annually in the regions,” says Realtor.com® senior economic research analyst Hannah Jones. “Southern markets saw slower price growth, as relatively abundant inventory relieved some price pressure in the region.”

Of the 20 cities tracked by the index, Portland, OR, had the lowest annual gain in home prices, at 2.2%.

Low housing inventory continues to fuel higher home prices

A lack of available homes for sale continues to be a major factor driving prices higher in many areas.

Jones notes that while home inventory increased 14.8% on an annual basis in February, it remained nearly 40% lower than prepandemic levels, according to Realtor.com data.

“Home supply improved annually starting in November 2023, but buyers still saw relatively fewer homes for sale compared to prepandemic, which prevented home prices from easing,” Jones explains. “Existing home sales increased 9.5% in February as buyers enjoyed more available inventory, despite still-climbing prices.”

More recent data show that buyers are increasingly turning to newly built homes, as the number of existing homes on the market continues to lag.

Sales of new, single-family houses jumped 8.8% in March from the prior month, according to a report last week from the U.S. Census Bureau and Department of Housing and Urban Development.

That report came after the National Association of Realtors® reported that sales of existing homes slumped in March, as prices continued to climb. The pullback in sales of previously owned homes did boost the number of homes on the market, which rose 4.7% from the prior month to 1.11 million units at the end of March.

“Inventory is still low but we are seeing more new listing activity,” said Bright MLS Chief Economist Lisa Sturtevant in a statement. “An increase of supply—both of new homes and of existing homes—may be coming at the same time that elevated rates, high home prices, and uncertainty in the market are leading some buyers to sit on the sidelines.”

Sturtevant forecasts that home prices will continue to rise into the summer, but that the pace of price growth will slow. She added that “in some markets, we will see modest year-over-year price declines this summer.”

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