Home prices surge in February

Photo (c) CHRISsadowski - Getty Images

The median listing price hit a record $392,000 last month

The rush to buy a home in early 2022 has further reduced the number of home listings and sent prices to record highs.

In February, the U.S. median listing price increased 12.9% year-over-year to a new all-time high of $392,000, surpassing the 2021 peak of $385,000 in July, according to real estate marketplace Realtor.com.

While there was some improvement in the number of homes for sale, inventory levels remain near historic lows. That, along with a jump in interest rates, posed affordability issues for buyers last month.

"Historically low interest rates"

Ryan David, owner and lead investor at We Buy Houses In Pennsylvania, says he has witnessed significant changes in the housing market over the last two years.

“Historically low interest rates are driving home sale prices,” David told ConsumerAffairs. “This is creating additional buyers and hurting already low housing inventory.”

But David notes that the COVID-19 pandemic is also a factor. He says it’s created a “tidal wave” of buyers – a wave that he says has yet to crest.

“Inflation coupled with more regulation and a sluggish U.S. economy is also driving fewer homes being built than demand calls for,” David said. “Add up all these factors, and it's become exceptionally difficult to buy a home.”

A decline in new home construction over the last decade has been a major contributor to shrinking inventory levels. Builders complain that the costs of land, materials, and labor have risen dramatically, leading to the construction of new “affordable housing.”

Inventory levels have plunged

Realtor.com reports that the inventory of active listings declined 24.5% year-over-year in February, improving slightly over January’s numbers. However, there were still 122,000 fewer available listings than during a typical day in February 2021, and inventory was down 62.6% from February 2020.

Danielle Hale, Realtor.com’s chief economist, says the fact that a record listing price has been set this early in the year is not a good sign for would-be buyers.

"This is the first time the record has been broken in February, signaling that competition is already heating up weeks before the start of the spring buying season,” Hale said. 

But Hale says there may be hope on the horizon if inventory levels continue to improve and there is a slowdown in rising home prices.

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