Home Prices Drop, Breaking 11-Year Streak of Increases

A 'For Sale' sign hangs in front of a home in Miami, Fla., on June 21, 2022. Joe Raedle/Getty Images

The longest streak of rising home prices on record was broken in February when the median price of a home in the United States dipped by 0.2 percent in annualized terms.

The National Association of Realtors (NAR) said Tuesday that the median existing home price was $363,000 in February, down 0.2 percent from $363,700 recorded in the same month last year.

“This ends a streak of 131 consecutive months of year-over-year increases, the longest on record,” the NAR said in a statement.

While the price dip is a good sign for buyers, affordability remains an issue for many would-be homebuyers. The median U.S. home price is still up around 45 percent from February 2019, according to FactSet data.

Further, given tight supply, a collapse in house prices seems unlikely.

“Inventory levels are still at historic lows,” NAR chief economist Lawrence Yun said in a statement. “Consequently, multiple offers are returning on a good number of properties.”

February also marked a reversal in a 12-month slide in existing home sales, which notched their largest monthly percentage increase since July 2020.

Total existing home sales—which include single-family homes, townhomes, condominiums, and co-ops—surged 14.5 percent between January and February. In year-over-year terms, however, total existing home sales were down 22.6 percent.

‘Buyers Pounced’

Lower mortgage rates as well as price cuts helped pull buyers back into the housing market, which is showing signs of stabilizing at lower levels.

“Conscious of changing mortgage rates, homebuyers are taking advantage of any rate declines,” Yun said. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”

Freddie Mac data show that the 30-year fixed-rate mortgage averaged 6.60 percent as of March 16, down from 6.73 percent from the week prior. A year ago, this averaged 4.16 percent, but Federal Reserve interest-rate hikes helped drive mortgage rates higher, sidelining some buyers.

“Buyers pounced when rates fell because they’re so volatile right now, which shows that there are plenty of people waiting in the wings for the right time to enter the market," Redfin Economics research lead Chen Zhao said in a recent statement

Home sellers gave more concessions and price cuts to prospective buyers during the three months ended Feb. 28 than during any three-month period since mid-2020, according to Redfin.

Sellers have concessions to 45.5 percent of home sales during the three months ended Feb. 28, beating the 31.1 share a year earlier. Concessions can include anything from offering to pay closing costs to funding repairs.

Redfin also reported that 25.2 percent of home sales included both a concession and a list price discount, the highest share since June 2020, when the company began tracking the measure.

Where mortgage rates go from here depends to a large extent on where the Fed decides to take its benchmark interest rate.

Unrest in the banking sector has driven speculation that the Fed might hit pause on its rate hikes despite inflation still running well above the central bank’s target of 2 percent.

“We expect them to either raise rates modestly or press pause for the time being, the latter of which would send mortgage rates down and bring back many sidelined buyers and sellers,” Zhao said.

Investors are overwhelmingly betting that the Fed’s policy-making arm, the Federal Open Market Committee, will deliver a 25 basis-point hike when it concludes its policy meeting on March 22.  This would put the federal funds rate within a range of 475–500 basis points.

As recently as the first quarter of 2022, the Fed was holding the benchmark interest rate near zero. Soaring inflation forced the Fed to lift rates, which have gone up at their fastest pace since the 1980s.