Home prices surged by over 19% in February: FHFA

Housing costs continued to increase at an elevated pace in February, according to the FHFA, but early indications of price easing are also beginning to emerge. 

The Federal Housing Finance Agency House Price Index showed home prices nationwide rising 19.4% on a year-over-year basis in February, and 2.1% from the previous month, an even faster climb from January’s pace of 18.2% and 1.6%. In February 2021, home prices rose at a monthly rate of 0.9% and at 12.2% compared to the same month in 2020.

“House prices rose to set a new historical record in February,” said Will Doerner, supervisory economist in the FHFA’s division of research and statistics, in a press release. “Acceleration approached twice the monthly rate as seen a year ago.” 

“Housing prices continue to rise owing in part to supply constraints,” he added. 

The FHFA’s index echoes recent reports issued by several research groups, showing widespread affordability challenges taking their toll on consumers this year. So far this year, numbers show that despite moderating price trends in the final months of 2021, the sustained pace of home-price acceleration and interest rate movements have led some buyers to suspend their search. 

But additional data released this week seem also to signal that the hot pace of price growth may finally be reaching a ceiling. Real estate brokerage Redfin reported bidding wars on home offers involving its agents fell in March for the first time in six months, dropping to 65% from 66.7% in February. However, they still occurred more frequently than they did in March last year when 62.2% of home offers faced challenges from other buyers.

“We expect bidding wars to ease further in the coming months, as rising mortgage rates price more buyers out of the market,” said Daryl Fairweather, Redfin’s chief economist, in a press release. 

“That should provide some relief for people who can still afford to buy, as they’ll likely face fewer competing offers and may no longer need to offer drastically over the asking price in order to win,” she added.

Redfin also recently reported that one in eight sellers had cut list prices between mid-March and mid-April, the highest share in five months. Average asking prices fell in the same period, while requests for home tours and other purchase-related services from Redfin agents declined over Easter week for the first time since last summer.

The trends are playing out as many economists anticipated they would, and signs of a price peak may have already appeared as well. New purchase-mortgage applications came in slower over the past few weeks, according to the Mortgage Bankers Association, and some researchers have revised their 2022 origination forecasts downward.

Year-over-year increases in home prices occurred across all nine U.S. census divisions, according to the FHFA, with the largest jump of 24.3% in the eight states making up the Mountain region. The South Atlantic division, extending from Maryland to Florida, followed closely behind at 24.1%, while East South Central states of Kentucky, Tennessee, Mississippi and Alabama saw prices rise 20.8%. 

On a monthly basis, the South Atlantic division led the nation in February with prices surging 2.9% from January. Mountain and Middle Atlantic divisions each saw housing costs increase by 2.4%.