After seven straight months of declines, U.S. home prices shifted upward in February.

But there continues to be two different stories playing out in the East and the West. On the east side of the country, home prices are trending up, but in the West they’re still down. And the country’s housing problems — affordability and inventory issues — aren’t going away.

Nationally, home prices rose a slight 0.16% in February, when seasonally adjusted — the strongest single-month gain since May 2022. However, at the same time, at 1.94%, annual home price growth fell below 2% for the first time since 2012, according to Black Knight’s latest mortgage monitor report released Monday.

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Sales were also up as interest rates dipped, but still remained 18% below 2019 pre-pandemic averages “as affordability pressures continue to weigh on demand,” according to the real estate data firm.

“After seeing home prices pull back for seven consecutive months at the national level, and likely spurred by homebuyers reacting to a dip in 30-year interest rates, the Black Knight Home Price Index showed something of a rebound occurring in many areas of the country in February,” Black Knight said in a news release Monday.

The firm described the February gains as a “widespread shift” at the “geographic level, with prices rising for the month in 78% of the 50 largest U.S. markets.” Those price increases took place in 39 markets. Compare that to just three months earlier, when 48 of those 50 markets were seeing price declines.

Andy Walden, Black Knight vice president of enterprise research, said it “marked the positive monthly growth we’ve seen in (eight) months.”

Black Knight data shows purchase activity increased when interest rates declined in the early part of February, “and borrowers were quick to take advantage of limited inventory. In many areas of the country, that dynamic — low inventory and a modest rise in demand — led to an uptick in home prices.”

In general, home price gains took place in areas “with better affordability and larger inventory deficits,” Walden said. However, the U.S. annual home price growth rate is still down, expected to fall below 0% by April. But “if inventory challenges and easing interest rates persist, they may well push it back into positive territory later this year.”

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“The unfortunate reality is that the scarce supply of inventory that’s the source of so much market gridlock isn’t getting any better,” Walden said.

He noted seasonally adjusted inventory levels continued to decline in February, “marking not only the fifth straight month of such declines, but also the largest inventory deficit we’ve seen since May of last year, with more than 90% of markets seeing such deficits grow in February.”

New listings ran 27% below pre-pandemic levels in February as home sellers “continued to shy away from the market,” Walden said, noting total active for-sale inventory ran 47% below pre-pandemic levels.

“Without a significant shift in interest rates, home prices or household income,” Walden said, “this is a self-fulfilling dynamic that is quite likely to continue for some time.”

Down in the West, up in the East

At the start of 2023, the West — which was ground zero for the pandemic housing frenzy and was also hit hard by the national housing market correction once the frenzy died down amid higher interest rates — saw the steepest home price declines, according to Black Knight’s January mortgage monitor.

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Austin, Texas, saw the largest month-over-month decline with prices falling 1.2% in the month, followed by San Francisco (-.77%), Seattle (-.77%), Salt Lake City (-.72%), San Jose (-.72%) and Las Vegas (-.71%), according to the report.

Contrast that with modest gains in the East. Chicago saw the largest uptick, at .53% in January, followed by by Philadelphia (+.43%), Hartford (+.39%) and Virginia Beach (+.32%)

It’s a dynamic that The Wall Street Journal recently described as “a tale of two housing markets.”

On a seasonally adjusted basis, 14 of the 50 largest markets saw home prices decline by 6% or more from their 2022 peaks. Four saw even more dramatic declines above 10%, and all were in the West: San Francisco (-13.1%), San Jose (-12.9%), Seattle (-11.8%), Austin (-11.5%) and Phoenix (-10.7%). Salt Lake City’s home prices declined 7% from its 2022 peak, according to Black Knight’s home price index.

In January, there were also 13 markets that saw prices down year over year, also all in the West. Two markets in California, San Jose (-10.5%) and San Francisco (-10.3%) were down by double digits.

Now jump ahead to February. The East continued home price gains, with the largest price increases month-over-month occurring in Miami (+.63%), along with Cincinnati (+.55), Columbus (+.53%), Hartford (+.52%), Memphis (+.51%) and Cleveland (+.50%).

Home sales are crashing down to reality in the West

“While some price increases — most notably in Miami, which had the largest of the month — can be chalked up to migratory inflows, stronger price gains are being seen more generally in those areas with better affordability and larger inventory deficits,” Black Knight reported in its February mortgage report.

The firm noted month-over-month gains in these areas equate to 6.1% to 7.6% annualized home price growth rates.

Yet again, the West saw the largest month-over-month price declines in February: Austin (-.82%), Las Vegas (-.53%), San Jose (-.52%), Salt Lake City (-.5%), Sacramento (-.37%), Seattle (-.34%), San Francisco (-.32%), Riverside (-.27%), Los Angeles (-.23%) and Phoenix (-.22%).

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Still, despite February’s shift, U.S. prices mostly remain below their 2022 peaks on an adjusted basis, Black Knight reported in its latest mortgage monitor, “although those gaps narrowed in most of the country.”

But not in the West.

“In areas seeing the steepest pullbacks, those declines worsened, with prices in San Jose, San Francisco, Austin, Seattle and Phoenix down more than 10%, and Las Vegas, Sacramento, Salt Lake City, San Diego and Los Angeles all between 7.5% and 10% off last year’s peaks,” Black Knight reported.

Eight markets, however — Louisville, Kansas City, Virginia Beach, Oklahoma City, Philadelphia, Hartford, Cincinnati and Miami — are back to their peak levels, according to Black Knight’s home price index.

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