Home prices unexpectedly jump for the first time in months
Home prices turned higher in February as mortgage rates fell to 6-month low
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U.S. home prices rose in February for the first time in seven months as lower mortgage rates reignited consumer demand, the latest sign of recovery in the housing market.
Median home prices climbed 0.16% in February from a month earlier, compared with a 3.4% decline in January, mortgage analytics firm Black Knight said in a report Monday. It marked the strongest one-month gain since May of last year.
Home prices are now just 2.6% below the peak notched last June.
"The purchase market increased when rates declined in the early part of the month, and borrowers were quick to take advantage of limited inventory," said Andy Walden, Black Knight’s vice president of enterprise research. "In many areas of the country, that dynamic – low inventory and a modest rise in demand – led to an uptick in home prices."
A for sale sign is posted in front of a home on March 22, 2023, in San Anselmo, California. ( Justin Sullivan/Getty Images / Getty Images)
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For months, higher mortgage rates have dampened consumer demand and brought down home prices. But as rates have slowly fallen from a peak of 7%, the housing market has shown early signs of stirring back to life.
The rise in home prices in February came amid a sharp decline in mortgage rates: Freddie Mac reported that rates on the 30-year fixed mortgage fell to about 6.09% at the beginning of the month before turning higher and climbing to 6.65%.
Rates have declined again in the wake of two bank failures after the federal regulators stepped in to shore up confidence within the financial system.
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Residential homes in Teaneck, New Jersey, US, on Thursday, Nov. 24, 2022. (Photographer: Yuvraj Khanna/Bloomberg via Getty Images / Getty Images)
Another problem confounding potential homebuyers is a lack of supply that has pushed the price of homes even higher.
"The unfortunate reality is that the scarce supply of inventory that’s the source of so much market gridlock isn’t getting any better," Walden said. "Without a significant shift in interest rates, home prices or household income, this is a self-fulfilling dynamic that is quite likely to continue for some time."
The interest rate-sensitive housing market has borne the brunt of the Federal Reserve's aggressive campaign to tighten policy and slow the economy.
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Policymakers already lifted the benchmark federal funds rate nine consecutive times and have signaled that a 10th increase is on the table at their May meeting amid signs of underlying inflationary pressures within the economy.