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Andrew Caballero-Reynolds | AFP | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
The rate at which home prices<\/a> grow is slowing down.<\/p>\n U.S. home prices<\/a> increased 0.6% from a month before in February, in line with the 0.6% average monthly gain in the roughly eight years leading up to the Covid-19 pandemic, according to a new<\/a> Redfin analysis.<\/p>\n Before the pandemic, it was normal for prices to grow about half a percent every month, or to increase around 5% or 6% annually, said Daryl Fairweather, the chief economist at Redfin.<\/p>\n “We’re back to that trend, despite these higher mortgage rates,” she said.<\/p>\n More from Personal Finance:<\/strong> A similar trend appeared in Moody’s Analytics House Price Index, said Matthew Walsh, assistant director and economist at Moody’s Analytics.<\/p>\n “Home prices are appreciating at the same pace as before,” he said. “It’s returned to the trend that we saw pre-pandemic.”<\/p>\n However, the market today is vastly different from the market two to eight years ago, experts say. The average home is still unaffordable<\/a> for most potential buyers while inventory has slightly improved but not enough to meet demand.<\/p>\n “The sentiment we’re getting from our agents is that neither sellers nor buyers are satisfied with this market,” Fairweather said. “Sellers are dissatisfied … with offers that they’re getting. And buyers are disappointed in rising prices and rising mortgage rates.”<\/p>\n<\/div>\n While the housing market has stabilized in terms of price growth, a major difference between the market today and the pre-pandemic period is the relatively low number of transactions, which is largely due to high mortgage rates, said Fairweather. Mortgage rates peaked at nearly 8% last year<\/a>, but are still over 6%<\/a>, according to Freddie Mac data.<\/p>\n In fact, the level of transactions are at “recessionary lows” despite “a pop in the data in February,” Walsh said.<\/p>\n Another factor affecting sales is the extremely limited supply of homes, he added.<\/p>\n New listings<\/a> climbed 5% during the last four weeks ended March 17, the biggest year-over-year jump since May 2023, Redfin found<\/a>. But “it’s like a small recovery from a rock bottom,” said Fairweather.<\/p>\n “We’re not back to where we were pre-pandemic,” she said.<\/p>\n Supply growth is mostly tied to a seasonal trend<\/a>, economists say. Owners often list their homes for sale in February because they prefer to move in the spring and summertime, Walsh said.<\/p>\n And sometimes, life happens. “Another factor is just people needing to move for either a new job or they’re getting married, or there’s some other big life event,” Fairweather said.<\/p>\n<\/div>\n The mortgage rate lock-in effect,<\/a> also known as the golden handcuff effect, kept homeowners with extremely low mortgage rates from listing their homes last year: They didn’t want to finance a new home at a much higher interest rate. Now, that is loosening its grip on the market and slightly boosting available supply, economists say.<\/p>\n “It was definitely keeping people in place, but the more time that passes, the less strong that effect becomes,” Fairweather said.<\/p>\n Some buyers who had put off listing their homes “are coming to terms with higher mortgage rates,” because they feel they can no longer postpone the move, Walsh explained.<\/p>\n While the rate lock-in effect is still playing a role in today’s low inventory, it will fade further over time, especially as the Federal Reserve decides to cut rates later this year, Fairweather said.<\/p>\n Mortgage rates<\/a> are also forecast to modestly decline this year as the Fed trims interest rates<\/a>, while home prices are likely to remain flat or unchanged nationally, Walsh said.<\/p>\n<\/div>\n New-home sales are running at the high end of the range seen pre-pandemic, averaging about 600,000 per month, Walsh said. There were 661,000 new homes sold in January, 1.5% more than in December, according<\/a> to the U.S. Census Bureau.<\/p>\n Buyers frustrated with the tight supply of existing homes, are giving a lift to the new-home market<\/a>. “Builders are certainly benefiting from that,” he said.<\/p>\n
What a $418 million settlement on home-sale commissions may mean for you<\/a>
In 2023, listings in this time frame sold for $7,700 more, research finds<\/a>
What to know about about a condo and a co-op apartment<\/a><\/p>\nLevels of transactions are at ‘recessionary lows’\u00a0<\/h2>\n
The rate lock-in effect is loosening its grip<\/h2>\n
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New builds are slightly improving<\/h2>\n