February was an interesting month for home prices.
It marked the first time in 131 months that home prices fell year-over-year, ending the longest price growth streak on record.
Home prices also rose in February for the first time after seven consecutive month-over-month price declines.
Driven by a combination of moderately declining mortgage rates earlier in the year along with low inventory levels, home prices rose 0.16% in February – the strongest single-month gain since May 2022, according to Black Knight, a real estate analytics company.
The median home price in February increased to $418,900 compared to $418,200 in January, based on repeat sales methodology which captures the value in the home stock, whether or not it goes on the market or gets sold, a Black Knight
The median existing-home price for all housing types (including condo and single-family homes) declined 0.2% to $363,000, from February 2022 ($363,700), according to data released last month by the National Association of Realtors, which uses home listings data.
“In many areas of the country, that dynamic – low inventory and a modest rise in demand – led to an uptick in home prices,” says Andy Walden, vice president of Enterprise Research at Black Knight.
While Freddie Mac’s 30-year mortgage rate of 6.32% is down from 6.73% earlier in the month and may be poised to trend lower in coming weeks, it’s still higher than the 6.26% average from February.
In another indication that buyers have begun returning to the market as mortgage rates declined slightly earlier in the year, existing-home sales reversed a 12-month slide in February, registering the largest monthly percentage increase since July 2020, according to the National Association of Realtors.
How are home prices doing?
All in, 39 of the 50 largest U.S. markets saw prices increase in February – in sharp contrast to just three months earlier, when 48 of those 50 were experiencing price declines.
Less than a year ago, all 50 major markets had double-digit annual home price growth rates, while as of February, only Miami can still make that claim, with a 11.1% increase year-over-year.
There are now 15 markets (up from 13 in January) where prices are down year over year, with Raleigh (-0.6%) and Minneapolis (-0.3%) now marginally below last year’s levels.
The largest year-over-year declines occurred in San Jose (-13%), San Francisco (-12%) and Seattle (-10%) where prices are down approximately 10% or more from the same time last year.
Lack of housing inventory
February saw the lowest inventory levels since May of last year, with more than 90% of markets seeing such deficits grow in February.
New listings – already trending well below pre-pandemic levels for months – ran 27% below those levels in February as potential home sellers continued to shy away from the market.
Total active for-sale inventory is back to 47% below pre-pandemic levels after having recovered to within 38% of normal levels late last year.
Without a significant shift in interest rates, home prices or household income, this is a self-fulfilling dynamic that is quite likely to continue for some time, says Walden.