Home Prices Inched Up in February, as Some Home Shoppers Braved the Gauntlet of Low Inventory and High Mortgage Rates (February 2023 Market Report)

·6 min read
  • The typical U.S. home value climbed slightly from January to February (0.1%). Home values are 4.4% higher than one year ago but 3.3% lower than their peak last July.

  • There were 22.2% fewer new for-sale listings entering the market compared to last February, and 31.4% fewer than in February 2020.

  • Slightly more than 800,000 homes were listed for sale at any point in February, the second-lowest February level in Zillow’s data history, which dates back to 2018.

  • Newly pending sales were down 19.1% year-over-year, and down 5.4% from February 2020.

  • Those pending sales took 17 days from listed to pending, at the median, compared to seven days last February, and 22 days in February 2020.

  • Asking rents climbed 0.3% month-over-month, snapping a three-month streak of substantially lower rent growth than normal.

Mortgage rates – both their high levels and their wild swings – are making life difficult for both buyers and sellers. This market is not nearly as frenzied as the last two years at this time, but home buyers might start to feel some déjà vu at the dearth of new listings to choose from, and the relatively stiff competition for each home as a result.

Buyers are motivated to work through affordability challenges, but are being left disappointed with few options to choose from. Homeowners are sticking with their current home and its low mortgage payment, bringing the flow of new listings down to record lows for this time of year. Meanwhile, volatility in the economy and financial markets makes planning extremely difficult.

The outlook for the heart of the spring selling season, in April and May, is up in the air as mortgage rates continue to fluctuate with macroeconomic news on inflation and monetary policy, plus new turmoil stemming from the closure of Silicon Valley Bank, among others, in early March.

Home values turned a corner nationally, but prices are still falling in some markets

Home values climbed 0.1% in February, leaving the typical home value at $328,604, or 3% below the peak value set in July 2022, according to the Zillow Home Value Index. Home values are 4.4% higher than one year earlier – a rapidly decelerating pace of annual growth, down from the nearly record-high 18.8% year-over-year growth measured in April.

Year-over-year home value appreciation was still highest in Miami (10.5%) and some more affordable mid-sized markets, including Richmond (7.4%), Oklahoma City (6.9%), Hartford (6.9%) and Cleveland (6.2%).

At the other extreme are five high-cost Western and tech-centric metro areas, where prices are down substantially year-over-year: San Francisco (-7.7%), San Jose (-6.1%), Sacramento (-4.5%), Austin (-4.3%), and Seattle (-3.9%) had the largest annual declines in home value growth. Thirteen of the 50 largest metro areas have home values lower than they were one year ago. All except Austin and New Orleans (-0.2%) are in the West.

Supply is still limited: buyers are forced to contend with very low inventory, and especially few new listings


The cooldown in the second half of 2022 was most apparent in the steady rise of total inventory. After buyers pulled back starting in the spring, inventory swung up from record lows in February to well above 2021 levels by late summer, and then even slightly above 2020 levels by the end of the year. High inventory is both a reflection of a cooler market (caused by fewer sales, or a glut of listings), and a cause of slower price appreciation: more listings means buyers have more options and less pressure to pay higher prices to secure sales.

After following a normal seasonal trajectory downward late last year, inventory has continued lower from mid-January through mid-March, when spring sellers usually begin to make their presence felt. New listings in February were down 22.2% year-over-year, a much steeper decline than January’s 17% annual decline.

That means buyers may feel like the market has swung from feast to famine. A relative glut of listings around the holidays last year, when buyers were decisively taking the upper hand in negotiations, has given way to another spring where sellers are back in the driver’s seat. In particular, on any given weekend every buyer had substantially fewer newly listed homes to choose from than they would have seen on comparable weekends of the past several years, giving sellers less of an incentive to cut their price to compete with a new crop.

Demand is subdued but determined as buyers grapple with interest rate volatility

Home buyers have proven very sensitive to changes in mortgage rates over the past several months, and February was no exception. Rates on 30-year mortgages fell from 6.48% on January 5 to a four-month low of 6.09% on February 2, before swinging back upward over the next four weeks to 6.56% on March 2. The downward trend in January provided a tailwind to buyers, who registered some continued improvement of weekly newly pending sales against year-ago comparisons: from a 30% year-over-year drop in the first week of the year, ending January 7, to a 19% drop in the week ending February 11. But as mortgage rates swung from a tailwind in January to a headwind by late February, sales slackened off a bit, dipping to a 253% year-over-year decline in the week ending March 11. [1]

All in all, the full month of February saw 19% fewer newly pending sales than February 2022, up a bit from a 20% year-over-year decline in January. Both months, though, are a stark improvement from late 2022, when year-over-year declines of 38% and 32% were observed in November and December, respectively.

Rents have stopped falling

Nationally, rents climbed 0.3% from January to February, according to the Zillow Observed Rent Index (ZORI). That is almost back to normal for this time of year, compared to a 0.4% average monthly gain in February of 2016 through 2020. Rents are now down only 0.5% from their peak in September 2022.

Annual rent growth decelerated again, to 6.3%. The cooldown in rent growth throughout 2022 observed in measures of asking rents, like ZORI, will likely begin to show up in official measures of inflation for average rents paid, like in the Consumer Price Index (CPI), sometime this year. At the moment, though, CPI’s rent measures are still seeing accelerating annual growth rates (from 8.6% in January to 8.8% in February for the Rent of Primary Residence component), as the elevated asking rents from last winter continue to filter through to tenants renewing their leases. But the good news about decelerating rent growth might already be showing up in the monthly change of CPI’s rent component, which fell from an annualized monthly rate over 10% in November and December to 8.8% in January and 8.9% in February.

More details, including local rent trends, can be found in this month’s Rental Market Report.




[1] Smoothed weekly newly pending listings.

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