After January’s “weakest start to a year for home prices since the early 2010s,” as noted by Bright MLS Chief Economist Lisa Sturtevant, home-price growth has now effectively “stalled” in February, according to the latest data.
The February S&P Cotality Case-Shiller Home Price Index saw a 0.7% year-over-year gain in home prices, shrinking from the 0.8% gain seen in January (revised from 0.9%). Month-over-month the index grew 0.1%, down from last month’s 0.2% rise.
Nicholas Godec, head of Fixed Income Tradables & Commodities at S&P Dow Jones Indices, noted that “U.S. home values have lost ground in real terms for nine consecutive months.”
“Mortgage rates near 6% continue to weigh on affordability and transaction activity, holding nominal price growth below inflation,” he continued.
As for individual cities, the seasonally adjusted 10-City Composite saw a 1.5% year-over-year gain (down from 1.7% in January), and a 0.1% month-over-month gain (down from 0.2%).
The seasonally adjusted 20-City Composite grew 0.9% year-over-year (down from 1.2%), and saw a 0.05% decrease month-over-month (down from a 0.2% rise).
Metro wise, Chicago led the pack in the 20-City Composite with a 5% year-over-year price gain, followed by New York and Cleveland with annual gains of 4.7% and 4.2%, respectively.
More notably, Godec said that “more than half of major U.S. metropolitan markets posted year-over-year price declines in February,” which signals that the “housing slowdown has broadened well beyond its Sun Belt origins.”
Denver beat out Tampa for the largest fall in February, decreasing 2.2% year-over-year. Other declines were seen in Seattle (down 2% year-over-year), Los Angeles (down 0.8%) and Washington, D.C. (down 0.1%). In the Sun Belt, Tampa fell 2.1% year-over-year, Phoenix fell 1.8% and Dallas fell 1.7%.
Sturtevant noted that the divide between growing and falling price gains is “driven by inventory.”
“Many markets in the Northeast and Midwest where inventory is constrained continue to post price growth,” she explained. “Alternatively, markets where inventory has surpassed pre-pandemic levels are seeing downward pressure on prices.”
Looking ahead, Realtor.com® Senior Economist Anthony Smith was slightly more optimistic, saying that the “spring market arrives with more favorable rate conditions than a year ago.”
Despite a recent rise in mortgage rates, they still sit at their “lowest level heading into the spring season in three years,” and inventory has observed some year-over-year growth.
“Whether those conditions translate into a meaningful demand pickup will depend on how geopolitical uncertainty and consumer confidence evolve through the season,” Smith continued. “Today’s data suggests the correction in more supply-rich metros has more room to run, with the broadening of declines into new geographies pointing to continued fragmentation rather than a national turning point.”
Sturtevant assessed at the current trajectory, despite the continued depreciation in home-price growth, “there are no signals that we are headed for a major drop in home prices.”
“In the current market, there are relatively few ‘forced sellers’ who need to get out at any price,” she noted. “Instead, we have a market where sellers are cutting asking prices modestly to attract buyers. Or they are taking their home off the market when they do not get the price they want.”
Homeowners have a “significant equity cushion” they are sitting on, Sturtevant explained, which means that “while some homeowners may want to sell, they do not have to sell.”
“This phenomenon will keep inventory relatively low and keep prices relatively resilient,” she concluded.
