The Black Knight Home Price Index reported that a drop in 30-year interest rates during February resulted in a rise in home prices and put an end to a seven-month period of declining growth. The report from the real estate analytics firm indicated a widespread shift in home price patterns across the country, with 39 of the largest 50 markets experiencing an upsurge in prices, leading to an overall improvement in the national trend.
The extensive rebound in prices was a significant turnaround from just three months prior, during which 48 out of the 50 biggest metropolitan areas in the United States experienced a decrease in prices.
The top-performing large cities in terms of monthly gains were Miami, which had a 0.63% increase, followed by Cincinnati (0.55%), Columbus, Ohio (0.53%), Hartford, Connecticut (0.52%), Memphis (0.51%), and Cleveland (0.5%).
Cities such as Austin, Las Vegas, San Jose, Salt Lake City, and Sacramento are still experiencing a decline in prices, with home prices falling by as much as 0.82% month over month in Austin.
According to Walden, the annualized growth rate of home prices in the United States continued to decrease, reaching 1.94% in February. This was the first time since 2012 that the figure had dropped below 2%.
He further added that the limited availability of inventory, which is the root cause of the current market deadlock, is not improving. In fact, inventory levels adjusted for seasonal changes continued to deteriorate in February, marking the fifth consecutive month of declines. This was also the largest deficit in inventory seen since May of the previous year, with over 90% of markets witnessing an increase in these deficits in February. Furthermore, new listings have remained below their pre-pandemic levels for several months and experienced a further decline of 27% in February. This was due to potential home sellers still hesitating to enter the market.
Despite having made progress towards returning to normal levels by reaching within 38% of pre-pandemic levels towards the end of last year, the active inventory available for sale has now decreased to 47% below its previous levels. Unless there is a substantial change in interest rates, home prices, or household income, this trend is likely to persist as a self-reinforcing cycle for an extended period.