Home prices rose in February amid higher demand and lower inventory in a sign that the housing market may be stabilizing after crashing under the weight of soaring mortgage rates and dampened demand.
February’s 0.16% increase is the first price growth in eight months, according to a report released by Black Knight on Monday. The report notes that demand was spurred by a dip in mortgage rates and that inventory levels continued to deteriorate in February, putting pressure on home prices across the country. The news is a glimmer of hope as several economic forecasters predict housing prices in some major markets will come crashing down this year.
NEW HOME SALES GREW SLIGHTLY IN FEBRUARY AS MORTGAGE RATES COOLED
After surging above 7% late last year, mortgage rates fell as low as 6.09% for a 30-year fixed-rate mortgage in early February, according to Freddie Mac. Mortgage rates then began rising again as the Fed eyed more rate hikes, increasing to 6.73% in early March. Since the collapse of Silicon Valley Bank, mortgage rates have tumbled to 6.32%.
Additionally, 78% of the country’s 50 largest housing markets registered rising home prices in February, a big turnaround from November, when prices were declining in 48 of the 50 markets.
“The purchase market increased when rates declined in the early part of the month, and borrowers were quick to take advantage of limited inventory. In many areas of the country, that dynamic — low inventory and a modest rise in demand — led to an uptick in home prices,” Andy Walden, Black Knight’s vice president of enterprise research, said.
Black Knight also reported that, while home sales were up in February, they were 18% lower than the pre-pandemic 2019 averages. That is in part because homebuying has become more unaffordable amid high inflation and high interest rates.
In other housing news, sales of new homes increased slightly from January to February, a sign that buyers might be reentering the market amid lower mortgage rates, according to data released late last month by the Census Bureau.
New home sales in February increased from the month before, rising 1.1% last month to a seasonally adjusted annual rate of 640,000. Nevertheless, sales were 19% lower than in February 2022.
The Fed once again hiked interest rates last month by a modest quarter of a percentage point, even despite the uncertainty from the collapses of SVB and Signature Bank. That ultimately means more pressure on mortgage rates this year.
In addition to new home sales, there was some big news in the housing market when existing home prices dropped from February 2022 to this past February, marking the first such decline after about 11 years of increases.
The median existing-home price for all housing types was $363,000, the National Association of Realtors reported — a decline of 0.2% from February 2022. The 131-month streak in housing price growth that was broken is the longest on record.
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Some economists expect bigger declines in home prices this year as some overheated housing markets post big drops.
Goldman Sachs researchers earlier this year predicted that housing prices in Austin, Texas, would fall by more than 15% this year alone. Likewise, Phoenix, Denver, and Seattle will see home prices dropping more than 10% this year and falling in 2024, as will the California cities of San Diego and San Francisco, according to the report.