After months of steady declines, home prices jumped in February, posting a 0.16% gain, according to CNBC. That uptick is the strongest one-month increase since May 2022, but home prices remain 2.6% below their peak last June. Prices fell in 48 of the 50 largest U.S. markets in November, but in a sudden reversal, 39 markets saw home prices rise in February.
The likely cause of this bump up in home prices at the start of 2023 is a drop in mortgage rates, leading to a 14.5% increase in closings on existing for-sale homes.
Behind the quick change are wide swings in mortgage rates. The average rate on the 30-year fixed began rising off of a record low at the start of 2022. By June it had gone from around 4% to just over 6%. Sales slowed down, and prices followed. By fall, the rate shot over 7%, and home prices began cooling more quickly.
In December and January, however, mortgage rates began pulling back, and homebuyers were quick to take advantage.
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