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Home price appreciation continues to slow as the U.S. heads into its busy spring homebuying season.
Affordability concerns and rising inventory are helping to further shift the tide of the last few years, when sellers were in the driver’s seat.
“We’re moving from a clear seller’s market to a balanced market, and that’s a good thing,” said Brad Case, chief residential economist at Homes.com, in a broader conversation about the spring selling season.
In January, home prices inched up by 0.9 percent year over year, down from 1.1 percent the year before, according to the latest index from S&P Cotatility Case-Shiller. In real terms, however, this means that home values have dropped over the past year, as inflation climbed 2.4 percent year over year in January.
Still, the pricing moderation is closer to what the country experienced before the pandemic upended everything, and it doesn’t seem like it will change course any time soon. Additional data from Homes.com shows that the median sale price in February came in at $375,886, up 0.2 percent year over year.
“We’re likely to see something that looks a whole lot more like markets that used to be considered normal,” Case said.
A potential thorn in the side of the market is the war with Iran, which has caused mortgage rates to slowly increase again after dropping in late 2024. In February, pending home sales ticked up 1.8 percent from the month before, according to the National Association of Realtors. But that could change if higher oil prices continue to trigger increases in borrowing costs, the group’s chief economist said in a statement.
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The country has seen more inventory come online — listings surged 14.2 percent year over year last month, per Homes.com. But to Case, it appears that sellers who have been hoping to move over the past few years may have finally decided mortgage rates are as good as they are going to get, as long as they don’t escalate significantly more.
“The mortgage lock-in effect seems, to me, to be going away, to be easing,” Case said. “That’s a good thing because it just generates more fluidity in the market.”