Year-over-year home prices nudged down in February, breaking a nearly 11-year streak of consecutive price increases, the National Association of Realtors (NAR) reported Tuesday.
Prices fell 0.2% in February compared to the same month in 2022, representing a roughly $700 decline to a median price of $363,000, the NAR reported. While median housing prices have been declining from a record-high of $413,800 in June, February’s slide represents the first year-over-year price drop since February 2012, according to The Wall Street Journal.
Mortgage rates climbed rapidly after the Federal Reserve launched an aggressive series of interest rate hikes in March 2022 to combat finaltion, hindering housing affordability. These elevated rates mean that even though prices have fallen slightly, the housing costs are still climbing, Jason Sorens, senior research faculty at the American Institute for Economic Research, told the Daily Caller News Foundation.
“Since February 2022, the average 30-year fixed-rate mortgage has gone up from 3.5% to 6.6%,” Sorens said. “Overall, then, monthly cost of homeownership is still going up,”
While sales were down nearly 23% on a year-over-year basis they shot up by 14.5% compared to January, snapping a 12-month slide in month-over-month home sales, the NAR reported. Mortgage rates fell in January and February after cresting 7% late last year, prompting renewed interest in home buying, although rates were still much higher than they were at the same time the year prior, the WSJ reported.
“Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” NAR Chief Economist Lawrence Yun said in a press release. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”
Total housing inventory registered at the end of February was 980,000 units, identical to January & up 15.3% from one year ago (850,000). Unsold inventory sits at a 2.6-month supply at the current sales pace, down 10.3% from January but up from 1.7 months in February ’22. #NAREHS
— NAR Research (@NAR_Research) March 21, 2023
By the end of February, however, mortgage rates had climbed back to 6.71%, a roughly 0.5 percentage point hike that sent new mortgage applications plunging to a 28-year low, according to the Mortgage Bankers Association. The surge in rates was driven in part by concerns that inflation was not cooling as fast as experts had hoped.
Housing inventory is still at “historic lows,” Yun noted, with current inventory levels sufficient to supply just 2.6 months of current demand. Housing affordability has been hindered in part by a lack of available housing, which has pushed prices up, pinching customers alongside elevated mortgage rates.
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