Home Prices Increase As Inventory Worsens, Affordability Slightly Eases

Home prices in the U.S. saw an increase in February for the first time in seven months, according to Black Knight's latest Mortgage Monitor Report.

What Happened: Price rises seen on both non-adjusted and seasonally adjusted bases can be attributed to a combination of a slight easing of affordability in January and early February and worsening inventory levels, according to the report.

Sales were up due to interest rate dips, but remained 18% below 2019 pre-COVID-19 pandemic averages as affordability pressures continue to weigh on demand.

Inventory levels continued to wane, with the seasonally adjusted number of homes available for sale falling for the fifth consecutive month to their lowest level since May of last year.

Prices were up 0.16% in February when adjusted for seasonality, the strongest single-month gain since May 2022. Annual home price growth fell below 2% for the first time since 2012, at 1.94%.

In February, 39 of the 50 largest U.S. markets saw home prices rise on an adjusted basis, marking a significant contrast to November when prices were falling in 48 of 50 markets.

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Positive for homeowners, home price increases helped to shore up homeowner tappable equity levels, which are now $1.6 trillion off-peak.

Tappable equity was at $9.3 trillion as of February, which is up 56% over the past three years. The average mortgage holder has $178,000 in tappable equity, down from more than $210,000 early last year.

Why It Matters: Despite the rise in home prices, inventory challenges persist and homebuyers remain affected by limited inventory. Industry experts expect that without a significant shift in interest rates, home prices or household income, this trend is likely to continue for some time.

Total active for-sale inventory is back to 47% below pre-pandemic levels after having recovered to within 38% of normal levels late last year.

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