Redfin Home Price Index: Prices Rose 0.6% in February, Marking Return to Pre-Pandemic Norm

Rhea-AI Summary

Redfin report shows home price growth stabilizing after pandemic fluctuations, with a 0.6% monthly increase in February 2024 and a 6.7% year-over-year rise. Mortgage rates, though elevated, are less volatile, aiding in price stability.

Insights

Real Estate Market Analyst

The stabilization of home price growth can be attributed to a less volatile mortgage rate environment compared to the peaks of the pandemic. This trend suggests a return to pre-pandemic market conditions, which is significant given the extreme fluctuations experienced over the past three years. The reduced volatility in mortgage rates, likely a result of the Federal Reserve's interventions, has provided a more predictable landscape for both buyers and sellers, which in turn has led to more stable home prices.

However, the current scenario also reflects a supply-side constraint; with new listings not keeping pace with demand, the housing market remains tight. This mismatch between supply and demand is keeping prices from falling, despite the dampening effect of higher mortgage rates on buyer enthusiasm. It's essential for investors to monitor inventory levels closely, as a significant increase could put downward pressure on home prices, while continued scarcity could maintain or even drive prices up.

Economic Analyst

From an economic standpoint, the housing market serves as a bellwether for broader economic trends, particularly consumer confidence and spending capacity. The alignment of current home price growth with pre-pandemic levels indicates a normalization of the market after a period of intense volatility. This normalization may reflect broader economic stabilization following the unprecedented fiscal and monetary measures taken during the pandemic.

However, the sustained high mortgage rates are indicative of the Federal Reserve's commitment to controlling inflation. This macroeconomic policy can have a cooling effect on the housing market by limiting borrowing power. Investors should consider the potential for a shift in policy, which could either alleviate or exacerbate current market conditions. Moreover, the interplay between mortgage rates and home prices will be important to watch as it will affect consumer affordability and, consequently, the overall health of the housing market.

Financial Analyst

For market participants, the current state of the housing market presents both opportunities and risks. The stabilization of home prices suggests that the market is finding its equilibrium after a period of speculative growth, which may provide a more solid foundation for investment decisions. The data pointing to home price growth returning to pre-pandemic levels could signal a maturation phase in the housing cycle, where growth is more measured and predictable.

Investors should also note the impact of the mortgage rate lock-in effect on housing supply. As rates stabilize, homeowners who previously refrained from selling due to higher rates may enter the market, potentially increasing supply. This could introduce some variability in home prices in the short to medium term. It's important for investors to stay informed about the trajectory of mortgage rates, as any significant changes could rapidly alter market dynamics and affect the valuation of real estate-related securities and investment vehicles.

While mortgage rates remain elevated, they’re not as volatile as they were at the height of the pandemic, which has helped stabilize home price growth

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — Home price growth is finally back to where it was before the pandemic, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. This follows a three-year rollercoaster ride in which prices soared when ultra-low mortgage rates fueled a homebuying frenzy and cooled when rates jumped due to the Federal Reserve’s effort to quell inflation.

U.S. home prices climbed 0.6% from a month earlier in February, on par with the 0.6% average monthly gain in the roughly eight years leading up to the pandemic. Prices seesawed during the pandemic, rising by as much as 2% month over month in January 2022 and falling by as much as 0.2% in August 2022.

The story is similar when looking at year-over-year changes. U.S. home prices climbed 6.7% from a year earlier in February, similar to the 6.9% average annual gain in the years leading up to the pandemic. By comparison, prices rose by as much as 22.9% year over year in March 2022 and by as little as 3.4% in June 2023.

This is according to the February Redfin Home Price Index (RHPI), covering the three months ending Feb. 29, 2024. Read the full RHPI methodology here.

"Home prices have plateaued here in Portland. They shot up at one point, then came back down to earth, and now they’re somewhere in the middle,” said Meme Loggins, a Redfin Premier real estate agent in Portland, OR. “There’s a mismatch between the attitudes of buyers and sellers. I have a lot of buyers coming in expecting a huge discount. Meanwhile, I have sellers who are standing firm on how much their house is worth after seeing their friends’ homes sell for way over the asking price during the pandemic. In reality, it’s neither a buyer’s or seller’s market."

Mortgage rates remain elevated, but they’re not nearly as volatile as they were before, which has helped stabilize home price growth. And while elevated mortgage rates have taken a bite out of homebuyer demand, that’s not translating into lower home prices today because there still aren’t enough homes for sale—even as new listings rebound. New listings rose to the highest level in nearly a year and a half last month as the mortgage rate lock-in effect eased, but housing supply was still far below pre-pandemic levels.

“Inventory has picked up dramatically in the past two weeks, but it’s getting snatched up quickly,” Loggins said. “Today, I took my clients to see a house that had only been on the market for seven hours—we toured it, they liked it, and I’m about to write an offer.”

Still, competition is nowhere near as fierce as it was during the pandemic, and Redfin agents say that the most important thing sellers can do is avoid overpricing their homes.

Prices Fell in Six Metros, Compared with 13 Metros in January

Home prices fell from a month earlier in six of the 50 most populous U.S. metropolitan areas, many of which were pandemic boomtowns that have since seen their housing markets cool: Tampa, FL (-0.5%), San Antonio (-0.4%), Charlotte, NC (-0.1%), Portland, OR (-0.1%), Fort Worth, TX (-0.1%) and Houston (-0.1%). By comparison, prices fell in 13 metros in January. Prices are likely soft in Texas and Florida in part because those two states have been building a lot of homes, which means supply has increased (rising supply often puts downward pressure on prices). In Florida, condo listings in particular are contributing to the jump in supply amid a surge in HOA and insurance fees.

In Nassau County, NY, home prices rose 2% from a month earlier in February—the biggest increase among the top 50 metros. Next came Montgomery County, PA (2%), Warren, MI (1.9%), Chicago (1.8%) and Indianapolis (1.6%).

To view the full report, including charts and metro-level data, please visit:
https://www.redfin.com/news/redfin-home-price-index-february-2024

About Redfin
Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240319174317/en/

Redfin Journalist Services:

Angela Cherry, 913-638-8249

press@redfin.com

Source: Redfin

FAQ

How much did U.S. home prices climb from a month earlier in February 2024?

U.S. home prices climbed 0.6% from a month earlier in February 2024.

What was the average monthly gain in home prices in the years leading up to the pandemic?

The average monthly gain in home prices in the years leading up to the pandemic was 0.6%.

What was the year-over-year change in U.S. home prices in February 2024?

U.S. home prices climbed 6.7% from a year earlier in February 2024.

How did mortgage rates impact home price growth according to the Redfin report?

Elevated mortgage rates, though less volatile, have helped stabilize home price growth.

What was the level of new listings in the housing market in February 2024?

New listings rose to the highest level in nearly a year and a half in February 2024.