Home Prices Reverse 3-Year Trend

In the wake of a tumultuous three-year period marked by soaring prices and cooling markets, U.S. home prices have aligned with pre-pandemic growth rates.

February saw a slight 0.6 percent increase in home prices from the previous month, a figure resonant with the average monthly growth experienced in the eight years before the pandemic’s onset, according to a report issued by Redfin on Tuesday. It’s a stabilization that signals a return to normative market conditions, with prices reflecting a balance between elevated mortgage rates and a steady homebuyer demand.

The report, noting the period of upward price volatility during the pandemic, indicates a median year-over-year price increase of 6.7 percent in February to $412,778, an adjustment that positions the market closely to the 6.9 percent annual gains typical of the years before the pandemic upheaval. While recovering from the extremes of the pandemic, the housing market now mirrors a more traditional trajectory of home price growth, the report said.

Following the trend of stabilization, the Redfin Home Price Index found nuanced changes in the market across various metropolitan areas.

In February, while most of the U.S. experienced a resurgence in home prices, aligning with the pre-pandemic norm, select metropolitan areas saw a dip. Cities like Tampa, San Antonio, Charlotte, Portland, Fort Worth, and Houston, each saw a marginal decrease in home prices.

The pattern of decline, particularly noticeable in areas that flourished during the pandemic, suggests a market correction influenced by an increase in housing supply, Redfin said, especially in states like Texas and Florida which have ramped up construction, inadvertently affecting price trajectories.

“Inventory has picked up dramatically in the past two weeks, but it’s getting snatched up quickly,” Meme Loggins, a Redfin Premier real estate agent said in the report.

Additionally, Florida’s real estate market is grappling with an uptick in condominium listings, according to Redfin, exacerbated by rising homeowners’ association and insurance fees, contributing to the region’s supply dynamics.

More broadly, the Commerce Department said that February saw a notable surge in completed new-home constructions, with privately owned housing completions jumping nearly 20 percent from January and up approximately 10 percent year-over-year to more than 1.7 million. The increase was even more pronounced in single-family properties, which saw a 20 percent rise for the month, surpassing a million new homes.

The resurgence in housing starts, which rebounded nearly 11 percent, suggests that the construction sector is poised to alleviate some of the housing market’s supply constraints. Particularly in the South and the Midwest, warmer weather conditions have expedited construction activity, contributing to the upward trend.

Increased construction activity and the issuance of building permits—which rose nearly 2 percent to 1.5 million compared to the previous month—signal a positive outlook for the housing market.

As the sector prepares for the prime spring home-buying season, expectations for lower mortgage rates in the latter half of the year could further stimulate market activity.