House prices in February showed the first annual decline in a decade
- House prices fell year on year for the first time in a decade last month, NAR reported.
- This drop comes as mortgage rates are still hovering around a multi-year high of around 7%.
- Earlier, a senior economist at NAR said that rate cuts could help the housing market avoid a crash.
House prices fell year-over-year in February, the first annual fall in a decade, according to a report from the National Association of Realtors.
The trade association said median prices for existing homes fell to $363,000 in February, down 0.2% from what median home prices were in February 2022. This is the first yearly decline seen by the market in February 2012 when the market began a 131-month streak of price gains.
Meanwhile, sales of existing homes jumped 14.5% in February to 4.58 million year on year. This is the biggest increase in home sales since July 2020, NAR reported on Tuesday.
“Aware of the shift in mortgage rates, homebuyers are taking advantage of any rate cut,” NAR chief economist Lawrence Yun said in a statement.
Interest rates on 30-year fixed mortgages have hovered around a 20-year high, thanks in part to the Fed’s aggressive rate hike over the past year, which has impacted how much consumers are paying for a range of loan products.
However, mortgage rates have come down in recent weeks as investors lowered their expectations of interest rate volatility. Fed officials are expected to raise rates by only 25 basis points at this week’s policy meeting, lower than previous estimates of a 50 basis point hike. Meanwhile, 30-year mortgage rates fell to 6.6%, according to Freddie Mac’s latest market research, from 7% last year.
Lower rates and home prices boost affordability in the market, helping to revive demand after a year of slowdown in activity. In 2022, home sales, new home builds and new home listings plummeted, prompting some experts last year to warn of a housing market crash that could lead to a sharp correction in home prices.
But Nadia Evangelou, NAR’s chief economist, told Insider earlier that she believes loosening interest rate expectations will help the market avoid a crash. Home sales likely bottomed out in early 2023, she estimates, with the year as a whole being a “turning point” for the market.
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