US Home Prices Fell in February 2023

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Facts

  • US home prices fell year-over-year for the first time in more than 10 years in February 2023, the National Association of Realtors reported Tuesday. The median existing-home price decreased by 0.2% to $363K.1
  • The Association also reported that lower prices, in addition to lower mortgage rates from mid-November 2022 to this February, led to the largest jump in the sale of previously owned homes in 2.5 years, ending a 12-month streak of declines.2
  • Existing home sales jumped 14.5% last month from January, bringing the annual rate to 4.58M — the largest increase since July 2020.3
  • Rates on 30-year mortgages eased to 6.6%, down from a high of 7% for much of the past year. The Federal Reserve is expected to increase rates by just 25 basis points – as opposed to an earlier estimate of 50 points – in its next policy meeting.3
  • The Fed’s multiple rounds of interest rate hikes, which were at record lows during the first two years of the COVID pandemic, started last year in an attempt to cool inflation. That led home sales to drop by more than 35% between Nov. 2021 and Nov. 2022.4

Sources: 1USA Today, 2Reuters, 3Business Insider, and 4 Forbes.

Narratives

  • Narrative A, as provided by CNN. The housing market is coming back thanks to buyers who are conscious of changing mortgage rates and taking advantage of even the slightest dip, even as the spring buying season is just beginning. Prices could become even more affordable moving forward, but the lack of inventory means it’s still a good time to sell a home. Everybody’s winning in this recovery.
  • Narrative B, as provided by Wall Street Journal. Don’t uncork the champagne yet. This data was computed before Silicon Valley Bank and Signature Bank’s collapses, which are causing unrest throughout the banking sector. There should be less consumer demand and tightened lending standards from banks for a while now, and there’s also a chance the Fed will do another major rate hike. The housing market, like the economy as a whole, is too unstable to celebrate.