Roughly one-quarter of U.S. states plus Washington, D.C., posted annual home price declines in February as nationwide softening persists in the aftermath of rapid appreciation during the COVID-19 pandemic.
As home prices nationwide rose 0.5% in the second month of the year, South Dakota, Florida and Montana saw respective price declines of 3%, 2.3% and 1.5% from one year ago, leading the 12 states that posted losses, according to real estate analytics firm Cotality.
On a monthly basis, national home prices fell 0.16% from January, with 23 states and Washington, D.C., posting losses. Ten states and the District of Columbia had posted annual declines in January, signaling accelerated price softening ahead of the spring homebuying season.
The company’s home price data feeds into the S&P Cotality Case-Shiller U.S. National Home Price Index, which was recently updated to reflect a 0.9% non-seasonally adjusted yearly gain in January, down from 1.1% growth in December.
Selma Hepp, chief economist at Cotality, noted in analysis accompanying the monthly data that “the U.S. housing market has finally collided with an affordability ceiling,” though she cautioned that headline figures signaling stagnant price growth “hides a massive internal rebalancing as different regions and property types move in opposite directions.”
Rather than a majority of markets performing on par with the national rate of home price growth, outperforming markets are offsetting underperforming markets. Resilient performance in Midwest and Northeast states like Illinois and New Jersey, which posted 4.8% and 5.9% price growth in February, are balancing out declines in softer markets.
In fact, seven states posted price-growth highs in February, including Rhode Island, Idaho and New Jersey.
“These diverse trends indicate an ongoing process of price discovery — one where sales and comparisons remain limited — and underscore a market that is rebalancing locally rather than correcting nationally,” added Hepp.
With the national median home price registering at around $409,000 in February, requiring an income of about $91,000 to affordably purchase, approximately 70% of the top 100 metropolitan areas in the U.S. are still classified as overvalued, according to Cotality.
As a result, affordability will continue to drive homebuying trends, alongside job opportunities. Expensive coastal cities like San Francisco and Los Angeles have watched prices retreat from pandemic-era highs — but that reprieve may be short-lived.
“This shift is happening just as the AI boom begins to create massive regional job growth and wealth,” Hepp explained. “While these high-cost coastal metros are currently recording flat or slightly negative year-over-year growth, they are forecasted to be the nation’s primary growth engines by 2027.”
