Housing market correction is running on fumes as Case-Shiller reports the first U.S. home price uptick since June—these 2 charts tell the story

On Tuesday, we learned that U.S. home prices as measured by the seasonally adjusted Case-Shiller National Home Price Index rose 0.15% between January and February. This month-over-month national home price uptick comes after national prices had declined every month between June 2022 and January 2023.

What does this mean? The housing correction that was spurred last summer by spiked mortgage rates is clearly losing steam. New-home sales are rising again. Mortgage purchase applications have bottomed. And now we’re once again seeing national house prices inch up.

“The [Case-Shiller] index posted a first monthly gain in February, after seven months of decline, suggesting that home prices nationally have bottomed out. Even in markets with the largest price drops since last year’s peaks, such as San Francisco, home prices picked up pace in February. Still, the housing markets continue to vary across markets and price tiers, but lower mortgage rates and low inventories have been helpful in providing the floor for prices where prices seemed to have nosedived following the mortgage rate surge,” wrote Selma Hepp, chief economist at CoreLogic, in a statement released on Tuesday.

As of February, U.S. home prices are just 2.8% below their seasonally adjusted peak in June 2022, or down 4.9% without seasonal adjustment. (On a year-over-year basis, national home prices are up 2%.)

The reason national home prices fell in the second half of 2022 boils down to the fact that housing affordability—or better put, the lack of affordability—has reached levels not seen since the housing bubble. That is the result of mortgage rates spiking from 3% to over 6% just after U.S. home prices ran up 41% during the Pandemic Housing Boom.

So why are national house prices rising again?

It also boils down to housing affordability and supply. On the housing affordability front, things improved entering 2023 as mortgage rates slipped below 7%. Meanwhile, the lack of inventory has acted as a floor preventing steeper declines in prices.

Keep in mind, when an index like Case-Shiller says “U.S. home prices,” it’s referring to the national aggregate. On a regional level, this story continues to vary.

Among the 20 major markets individually tracked by Case-Shiller, 11 markets posted a month-over-month increase in February. That includes Eastern markets like Cleveland, Charlotte, and Washington, D.C.

Among those same 20 major markets, nine markets posted month-over-month home price declines in February. That includes Western markets like Phoenix and Las Vegas.