Finance
Home prices climb 6.4%, hit new record high in February: Case-Shiller
Homebuyers won’t get a break with home prices anytime soon. (iStock)
Home prices kept climbing in February and hit a new all-time record, defying odds that higher mortgage rates might have a more pronounced negative impact on gains, according to the latest S&P CoreLogic Case-Shiller national home price index report.
Home prices are now 6.4% above their level this time last year, up from the 6% increase registered in January. The 10-city composite increased 8% annually from 7.4% the previous month. At the same time, the 20-city composite posted a rise of 7.3%, up from 6.6% the previous month.
Across the nation, home prices increased 0.6% month-over-month after dipping the previous month. The 10-city composite registered 1% growth, while the 20-city composite increased by 0.9%. The indices measure home prices in major metros across the country. This annual and monthly growth in home prices comes as homebuyers struggle with affordability issues caused by high mortgage rates and a lack of housing supply.
“Since the previous peak in prices in 2022, this marks the second time home prices have pushed higher in the face of economic uncertainty,” S&P Dow Jones Indices Head of Commodities, Real & Digital Assets Brian D. Luke said. “The first decline followed the start of the Federal Reserve’s hiking cycle. The second decline followed the peak in average mortgage rates last October.”
“Enthusiasm for potential Fed cuts and lower mortgage rates appears to have supported buyer behavior, driving the 10- and 20-City Composites to new highs,” Luke continued.
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These cities saw the most significant house price gains
San Diego reported the highest year-over-year growth, with an annual increase of 11.4% in February—the highest year-over-year gain among the 20 cities. Chicago and Detroit followed in second place, each registering an annual increase of 8.9%. Portland, Oregon, saw the smallest gain in the index, just 2.2%.
“The Northeast region, which includes Boston, New York, and Washington, D.C., ranks as the best-performing market over the last half year,” Luke said. “As remote work benefited smaller (and sunnier markets) in the first part of the decade, return to office may be contributing to outperformance in larger metropolitan markets in the Northeast.”
Homebuyers can find the best mortgage rate by shopping around and comparing your options. You can visit an online marketplace like Credible to compare rates, choose your loan term and get preapproved with multiple lenders at once.
Mortgage rates will stay higher for longer
The personal consumption expenditures (PCE) price index, excluding food and energy prices — a key metric the Federal Reserve tracks to measure inflation — increased by 3.7% after rising to 2% in the fourth quarter, according to the latest gross domestic product (GDP) report. An increase in inflation could delay the timeline for rate cuts or even introduce possible rate hikes, according to Jim Baird, Plante Moran Financial Advisors’ chief investment officer.
“Recession fears have abated for now, but inflation remains a key concern for consumers and one for which the outlook remains mixed,” Baird said in a statement. “Inflation has receded significantly since peaking but has been stuck in a comparatively narrow range by most measures since last fall. Even a modest resurgence in inflation could spook consumers while further delaying potential Fed rate cuts or putting the possibility of some additional tightening back on the table.”
Since July, the central bank has kept its policy rate in the 5.25% to 5.5% range. Following its March meeting, Fed Chair Jerome Powell said that while interest rate cuts were still on the table for this year, the Fed remained committed to bringing inflation down to a 2% target rate and warned that lowering rates too soon would risk bringing inflation back while holding back too long posed a risk to economic growth.
Mortgage rates have hovered above 7% for two weeks, and borrowing costs will likely continue to increase as the prospect of interest rate cuts moves further into the distance.
“As with many economic indicators, the road to normalizing housing markets remains windy,” CoreLogic Chief Economist Selma Hepp said. “While home sales and inventories are improving over last year’s bottom, higher mortgage rates continue to challenge affordability and keep many potential buyers on the sidelines.”
If you’re looking to become a homeowner, you could still find the best mortgage rates by shopping around. Visit Credible to compare your options without affecting your credit score.
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U.S. Federal Reserve Chair Jerome Powell testifies before a Senate Banking, Housing and Urban Affairs Committee hearing on “The Semiannual Monetary Policy Report to the Congress,” at Capitol Hill in Washington, U.S., Feb. 11, 2025.
Craig Hudson | Reuters
The popular narrative among Federal Reserve policymakers these days is that policy is “well-positioned” to adjust to any upside or downside risks ahead. However, it might be more accurate to say that policy is stuck in position.
With an abundance of unknowns swirling through the economy and the halls of Washington, the only gear the central bank really can be in these days is neutral as it begins what could be a long wait for certainty on what’s actually ahead.
“In recent weeks, we’ve heard not only enthusiasm — particularly from banks, about possible shifts in tax and regulatory policies — but also widespread apprehension about future trade and immigration policy,” Atlanta Fed President Raphael Bostic said in a blog post. “These crosscurrents inject still more complexity into policymaking.”
Bostic’s comments came during an active week for what is known on Wall Street as “Fedspeak,” or the chatter that happens between policy meetings from Chair Jerome Powell, central bank governors and regional presidents.
Officials who have spoken frequently described policy as “well-positioned” — the language is now a staple of post-meeting statements. But increasingly, they are expressing caution about the volatility coming from President Donald Trump’s aggressive trade and economic agenda, as well as other factors that could influence policy.
“Uncertainty” is an increasingly common theme. In fact, Bostic titled his Thursday blog post “Uncertainty Calls for Caution, Humility in Policymaking.” A day earlier, the rate-setting Federal Open Market Committee released minutes from the Jan. 28-29 meeting, with a dozen references to the uncertain climate in the document.
The minutes specifically cited “elevated uncertainty regarding the scope, timing, and potential economic effects of possible changes to trade, immigration, fiscal, and regulatory policies.”
Uncertainty factors into the Fed’s decision making in two ways: the impact that it has on the employment picture, which has been relatively stable, and inflation, which has been easing but could rise again as consumers and business leaders get spooked about the impact tariffs could have on prices.
Missing the target
The Fed targets inflation at 2%, a goal that has remained elusive for going on four years.
“Right now, I see the risks of inflation staying above target as skewed to the upside,” St. Louis Fed President Alberto Musalem told reporters Thursday. “My baseline scenario is one where inflation continues to converge towards 2%, providing monetary policy remains modestly restrictive, and that will take time. I think there is a potential for inflation to remain high and activity to slow. … That’s an alternative scenario, not a baseline scenario, but I’m attentive to it.”
The operative in Musalem’s comment is that policy holds at “modestly restrictive,” which is where he considers the current level of the fed funds rate between 4.25%-4.5%. Bostic was a little less explicit on feeling the need to keep rates on hold, but emphasized that “this is no time for complacency” and noted that “additional threats to price stability may emerge.”
Chicago Federal Reserve President Austan Goolsbee, thought to be among the least hawkish FOMC members when it comes to inflation, was more measured in his assessment of tariffs and did not offer commentary in separate appearances, including one on CNBC, on where he thinks rates should go.
“If you’re just thinking about tariffs, it depends how many countries are they going to apply to, and how big are they going to be, and the more it looks like a Covid-sized shock, the more nervous you should be,” Goolsbee said.
Many risks ahead
More broadly, though, the January minutes indicated a Fed highly attuned to potential shocks and not interested in testing the waters with any further interest rate moves. The meeting summary pointedly noted that committee members want “further progress on inflation before making additional adjustments to the target range for the federal funds rate.”
There’s also more than just tariffs and inflation to worry about.
The minutes characterized the risks to financial stability as “notable,” specifically in the area of leverage and the level of long-duration debt that banks are holding.
Prominent economist Mark Zandi — not normally an alarmist — said in a panel discussion presented by the Peter G. Peterson Foundation that he worries about dangers to the $46.2 trillion U.S. bond market.
“In my view, the biggest risk is that we see a major sell off in the bond market,” said Zandi, the chief economist at Moody’s Analytics. “The bond market feels incredibly fragile to me. The plumbing is broken. The primary dealers aren’t keeping up with the amount of debt outstanding.”
“There’s just so many things coming together that I think there’s a very significant threat that at some point over the next 12 months, we see a major sell-off in the bond market,” he added.
In this climate, he said, there’s scant chance for the Fed to cut rates — though markets are pricing in the potential for a half percentage point in reductions by the end of the year.
That’s wishful thinking considering tariffs and other intangibles hanging over the Fed’s head, Zandi said.
“I just don’t see the Fed cutting interest rates here until you get a better feel about inflation coming back to target,” he said. “The economy came into 2025 in a pretty good spot. Feels like it’s performing well. Should be able to weather a lot of storms. But it feels like there’s a lot of storms coming.”
Walmart stock may be a steal.
Former Walmart U.S. CEO Bill Simon contends the retailer’s stock sell-off tied to a slowing profit growth forecast and tariff fears is creating a major opportunity for investors.
“I absolutely thought their guidance was pretty strong given the fact that… nobody knows what’s going to happen with tariffs,” he told CNBC’s “Fast Money” on Thursday, the day Walmart reported fiscal fourth-quarter results.
But even if U.S. tariffs against Canada and Mexico move forward, Simon predicts “nothing” should happen to Walmart.
“Ultimately, the consumer decides whether there’s a tariff or not,” said Simon. “There’s a tariff on avocados from Mexico. Do you have guacamole with your chips or do you have salsa and queso where there is no tariff?”
Plus, Simon, who’s now on the Darden Restaurants board and is the chairman at Hanesbrands, sees Walmart as a nimble retailer.
“The big guys, Walmart, Costco, Target, Amazon… have the supply and the sourcing capability to mitigate tariffs by redirecting the product – bringing it in from different places [and] developing their own private labels,” said Simon. “Those guys will figure out tariffs.”
Walmart shares just saw their worst weekly performance since May 2022 — tumbling almost 9%. The stock price fell more than 6% on its earnings day alone. It was the stock’s worst daily performance since November 2023.
Simon thinks the sell-off is bizarre.
“I thought if you hit your numbers and did well and beat your earnings, things would usually go well for you in the market. But little do we know. You got to have some magic dust,” he said. “I don’t know how you could have done much better for the quarter.”
It’s a departure from his stance last May on “Fast Money” when he warned affluent consumers were creating a “bubble” at Walmart. It came with Walmart shares hitting record highs. He noted historical trends pointed to an eventual shift back to service from convenience and price.
But now Simon thinks the economic and geopolitical backdrop is so unprecedented, higher-income consumers may shop at Walmart permanently.
“If you liked that story yesterday before the earnings release, you should love it today because it’s… cheaper,” said Simon.
Walmart stock is now down 10% from its all-time high hit on Feb. 14. However, it’s still up about 64% over the past 52 weeks.
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