House prices fell in February, breaking a decade-long streak of year-on-year increases

Washington DC
CNN
—

The median price of a U.S. home was lower in February than it was in February 2022, ending more than a decade of year-over-year increases, the longest on record, according to a National Association of Realtors report released Tuesday.

The median price for existing homes was $363,000 in February, down 0.2% from a year ago. This marks the first year-over-year price decline in 131 consecutive months of year-over-year increases that began in February 2012.

But home sales rose, marking the biggest monthly percentage increase since July 2020.

With median home prices lower than a year ago, U.S. home sales rose in February, following a full year of declining home sales due to rising mortgage rates and prices remaining high, keeping home buyers out of the market. February’s reversal in sales also ended the longest streak of falling home sales from month to month, going back to 1999 for all homes and 1968 for detached homes.

Sales of existing homes – which include single-family homes, terraced houses, housing associations and co-operative homes – increased by 14.5% in February from January. But sales were down 22.6% from a year ago.

The seasonally adjusted annual sales pace fell from 5.92 million units a year ago to 4.58 million. The sharp decline in sales activity has been driven by the large increase in mortgage interest rates over the past year.

Mortgage rates remain volatile — in February rates rose half a percentage point — but rates are cooling, according to NAR.

“Conscious of changing mortgage rates, homebuyers take advantage of any drop in interest rates,” said Lawrence Yun, NAR’s chief economist. “We see stronger sales gains in areas where housing prices are falling and the local economies are adding jobs.”

Inventory remains stubbornly low, Yun said.

Total housing inventory at the end of February was 980,000 units, the same as last month and up 15.3% from a year ago. Unsold inventory has a 2.6-month supply at today’s sales pace, down 10.3% from January but up from 1.7 months a year ago.

“Inventory levels remain at historically low levels,” Yun added. “As a result, more offers are coming back on a good number of properties.”

Existing home sales gained ground in February as buyers responded to mortgage rates that were slightly lower as prices had declined since November, said Hannah Jones, economic data analyst at Realtor.com.

“Suppressed housing demand continues to be sensitive to changes in mortgage rates as potential buyers take advantage of any improvement in affordability,” she said.

Home sellers considering putting their home on the market will still be in a strong position to capitalize on home equity, she said, as low inventory and strong demand to buy have kept prices strong in many places. “But the shrinking buyer base makes the task more challenging,” Jones said.

“Home sales remain well below last year’s levels, signaling that significant price gains must be made before buyers can return to the market in droves,” Jones said.

Typically February marks the beginning of the spring buying season, and usually both buyer and seller activity increases as the weather warms and the end of the school year approaches.

“As high prices and high mortgage rates continue to stifle buyer activity, this spring’s market is expected to be toned down from the past couple of years,” she said. “However, the housing market remains undersupplied, so well-priced, well-maintained listings are likely to attract buyer attention.”

This story is a work in progress and will be updated.