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For the first time in over a decade, the median price of existing homes in the U.S. fell by 0.2% year-over-year in February to $363,000, according to National Association of Realtors (NAR) data issued Tuesday.
The year-over-year decrease marks the first since 2012, and comes after prices hit an all-time high of $413,800 last June. Falling prices were largely driven by a dip in the cost of single-family homes and an increase in sales of existing homes, which rose 14.5% from January to 4.58 million, breaking a year-long decline.
NAR’s Chief Economist Lawrence Yun said that he believes home sales “have already bottomed out,” as a result of lower mortgage rates in January and February, which encouraged many buyers to enter the market.
Yun warned that inventory levels remain low, and buyers continue to face high borrowing costs.
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Further, the figures released by the NAR showed that median selling prices in the Northeast and West fell by 4.5% and 5.6%, respectively, compared to the previous year, with gains recorded in the Midwest and South. While lower prices could attract more buyers to the market, a lack of homes for sale and high borrowing costs may limit how much prices can fall.
The slowdown in the U.S. housing market has largely been attributed to the Federal Reserve’s aggressive policy tightening campaign, which caused mortgage rates to soar last year and discouraged many prospective buyers.
While this recent drop in median prices may provide some relief for buyers, the market remains constrained by the Fed’s monetary policy.
As such, it’s unclear whether the recently falling prices and increasing sales will continue, a trend that will likely be impacted by the Fed's decision on Wednesday on whether to raise or keep interest rates steady.
If the Fed pauses rates, something banking giant Goldman Sachs is suggesting will happen, mortgage rates should moderate over the next month.
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