Home prices are back on the rise as the spring market proves more competitive than expected

After cooling for the better part of last year, home prices are on the rise again.

A sharp drop in new listings, adding to an already meager supply of homes for sale, is leading to renewed bidding wars and more homes selling for above asking price.

Home prices rose a seasonally adjusted 0.45% in March from February, according an early look at the Black Knight Home Price Index provided exclusively to CNBC. After revisions to January and February reads, this is now the third consecutive month of price increases.

Roughly 30% fewer new listings came on the market in March compared with pre-pandemic norms. The deficit continues to grow, as fewer potential sellers want to list their homes in today’s higher-mortgage-rate environment. This comes in the heart of the spring housing market, when demand is historically highest.

“A modest bump in homebuyer demand ran headlong into falling for-sale supply,” said Andy Walden, Black Knight’s vice president of enterprise research. “Just five months ago, prices were declining on a seasonally adjusted month-over-month basis in 92% of all major U.S. markets. Fast forward to March, and the situation has done a literal 180, with prices now rising in 92% of markets from February.”

Competition among buyers is not only pushing prices higher but also accelerating the market again. Nearly half of homes on the market are selling within two weeks, the highest share in nearly a year, according to Redfin, a real estate brokerage.

The national gains, however, do not show sharp differentials in price strength and weakness regionally. Prices in the West, where metropolitan markets had been most expensive, are well off their recent peaks, while 40% of other major markets have seen prices return to peak levels.

Of the nation’s 50 largest housing markets by population, just Austin, Salt Lake City and San Antonio are seeing prices fall month to month. Prices in Phoenix and Dallas are flat.

The initial softening in home prices came early last summer, when mortgage rates had basically doubled in the span of a few months. Rates are now off their recent peak, but not by much. The average rate on the popular 30-year fixed mortgage has been bouncing between 6% and 7%; in the first few years of the pandemic it hit more than a dozen record lows, generally hovering around 3%.

Buyers are clearly getting used to the higher-rate environment, as sales have strengthened for the past few months. Homebuilders have recently reported strong quarterly earnings, as they use incentives like mortgage rate buydowns to pull in sales. Builders also have far more supply and are clearly benefitting from the lack of existing homes for sale.

A separate report released Tuesday from CoreLogic focuses on home price comparisons from a year ago, but also shows prices gaining month to month. Prices in March were just over 3% higher than last year nationally, but markets in the sunbelt are far outpacing cities in the West and Northeast. Prices in Miami were up nearly 15% from a year ago.

Meanwhile, home prices in 10 states are lower than they were last March, according to CoreLogic: Washington (-7.4%), Idaho (-3.6%), Nevada (-3.5%), Utah (-3.4%), California (-3%), Montana (-2.3%), Oregon (-2%), Colorado (-1%), Arizona (-0.9%) and New York (-0.6%).

“The monthly rebound in home prices underscores the lack of inventory in this housing cycle,” wrote Selma Hepp, CoreLogic’s chief economist in a release. “In addition, while the lack of affordability generally weighs on home price growth, mobility resulting from remote working conditions appears to be a current driver of home prices in some areas of the country.”