U.S. Home Price Growth Slowed in February, Leading to a Pickup in March Sales

U.S. home price growth slowed in February, leading to a pickup in sales in the strongest markets.

Prices gained 2% in February after a 3.7% gain January, according to the S&P Corelogic Case-Shiller Index, a leading housing market metric.

The Case-Shiller 10-city composite index had an annual increase of 0.4%, down from 2.5% in January. The 20-city composite showed a 0.4% year-over-year gain, down from 2.6% in January. All 20 cities reported lower prices in the year ending in February 2023 versus the year ending in January 2023. 

Miami, Tampa and Atlanta reported the highest year-over-year gains in the 20-city composite. Miami showed a 10.8% year-over-year price increase, followed by Tampa with a 7.7% year-over-year increase and Atlanta with a 6.6% year-over-year jump. The biggest price drops were in the tech hubs in the West.

The National Composite home price index, that declined for seven consecutive months, rose 0.2% in February though it is still 4.9% below its June 2022 peak, according to Craig J. Lazzara, Managing Director at S&P DJI. On a year-over-year basis, the national composite is 2% above where it sat in February of 2022. 

This moderation can also be seen at a more granular city-level data.

“Before seasonal adjustment, prices rose in 12 cities in February (versus in only one in January). Seasonally adjusted data showed nine cities with rising prices in February (versus five in January). With or without seasonal adjustment, most cities’ February results showed improvement relative to their January counterparts," said Lazzara.

The February results predate the banking industry’s tumultuous March, although prospective homebuyers remain focused on the way the Federal Reserve is handling interest rates. 

“Although forecasts are mixed, so far the Federal Reserve seems focused on its inflation-reduction targets, which suggests that interest rates may remain elevated, at least in the near-term," Lazzara said. "Mortgage financing and the prospect of economic weakness are therefore likely to remain a headwind for housing prices for at least the next several months.”  

The slowdown in housing price increases and declines in some regions may have boosted home sales through the month of March. According to the U.S. Census Bureau, sales of newly built single-family houses in March rose 9.6%. Sales are still down 3.4% from March 2022. The median sale price in March was $449,800, up from the February median sales price of $438,200.

Inventory shrank slightly in March, indicating that as mortgage rates slowly come down, would-be homebuyers are moving back into the market. New home supply is showing 7.6 months of inventory at the current sales rate, down from 8.2 months in February.

The data from Case-Shiller is consistent with reports from the federal government as well. Home prices were up 0.5% in February from January, according to the Federal Housing Finance Agency. Year-over-year, house prices rose 4% in February 2023 from February 2022.

“This increase was, in part, due to a decline in mortgage rates by more than half a percentage point from the peak reached in early November as well as historically low housing inventory," said Dr. Nataliya Polkovnichenko, Supervisory Economist in FHFA’s Division of Research and Statistics.​