After three years of price fluctuations, home price growth in the United States has finally slowed down to match levels recorded before the COVID-19 pandemic, a new analysis found.
Home prices in the U.S. increased by 0.6% in February compared to the month before. This was the average monthly gain recorded in the eight years before the pandemic, according to a new report from Redfin.
Year-over-year changes in home prices are also back to pre-pandemic levels. Home prices climbed 6.7% from a year earlier in February, similar to the 6.9% average annual gain recorded in the years leading up to the COVID-19 pandemic.
Does This Mean Homes Are Now More Affordable?
Despite price growth falling to pre-pandemic levels, the average home in the U.S. is still unaffordable for most potential buyers.
"There's a mismatch between the attitudes of buyers and sellers. I have a lot of buyers coming in expecting a huge discount. Meanwhile, I have sellers who are standing firm on how much their house is worth after seeing their friends' homes sell for way over the asking price during the pandemic. In reality, it's neither a buyer's or seller's market," Meme Loggins, a Redfin Premier real estate agent, said in the report.
A recent research from digital real estate company Zillow found that homebuyers would need to make over $106,000 to comfortably afford a house, which is an 80% increase from the annual $59,000 household income needed pre-pandemic.
Homeownership is considered affordable if a buyer does not need to spend more than 30% of their pre-tax income on housing costs.
A separate study, specifically one from real estate services firm CRBE, found that buying a home in the country is currently 38% more expensive than renting. The average monthly payment on a mortgage for a new home was $2,997 in 2023. On the other hand, the average monthly payment on a new apartment lease was $2,165.
In addition, mortgage rates are forecasted to stay above 6% until the fourth quarter of the year 2025, according to the government-backed organization Fannie Mae.
