Rosalind Evans
In a housing market that’s been anything but predictable, a new analysis from Redfin brings to light a striking trend: home price growth has decelerated to rates reminiscent of the pre-pandemic era. February saw U.S. home prices increase by 0.6% from the previous month, which aligns with the average monthly gains observed in the eight years before the COVID-19 pandemic shook global economies. This shift signals a return to a semblance of normalcy, according to Daryl Fairweather, Redfin’s chief economist. “We’re back to that trend, despite these higher mortgage rates,” she noted, underscoring the resilience of the housing market’s growth patterns.
Echoing this sentiment, Matthew Walsh, assistant director and economist at Moody’s Analytics, observed a similar alignment in the Moody’s Analytics House Price Index. “Home prices are appreciating at the same pace as before,” he remarked, highlighting a reversion to pre-pandemic growth trajectories. However, the current market conditions reveal stark differences from past years beneath this surface-level stability. High mortgage rates have maintained the average home’s unaffordability for many, while inventory levels, albeit slightly improved, remain insufficient to satisfy demand. This imbalance has left sellers and buyers grappling with dissatisfaction—a sentiment encapsulated by Fairweather’s insights on market dynamics.
Moreover, the present housing landscape is characterized by “recessionary lows” in transaction levels, exacerbated by prohibitive mortgage rates and a glaring scarcity of available homes. Fairweather shares this observation, supported by Walsh’s commentary on a temporary surge in transaction data. It paints a picture of a market in flux, caught between stabilizing price growth and persistent structural challenges.
Several vital developments offer glimpses of potential relief and adaptation as the narrative unfolds. The “rate lock-in effect”—a phenomenon where homeowners are hesitant to sell due to unfavorable mortgage rate comparisons—shows signs of weakening, potentially easing the inventory crunch. Additionally, the new-home sector exhibits signs of vigor, with sales figures outpacing pre-pandemic averages, as builders tap into the unmet demand with attractive incentives and alternatives to the constrained existing-home market.
While the return to pre-pandemic home price growth rates might suggest a market coming full circle, the underlying dynamics tell a story of adaptation and enduring challenges. Sellers and buyers navigate a landscape shaped by high mortgage rates, inventory shortages, and shifting economic currents. As these forces interact, the trajectory of the housing market will likely continue to evolve, shaped by the interplay of policy, consumer sentiment, and the broader economic environment.
