- In February, home prices fell on a year-over-year basis for the first time since 2012, Redfin said.
- But March has seen a shift in the market with the implosion of Silicon Valley Bank.
- More homebuyers came into the market as mortgage rates dropped.
The home prices dropped on a year-over-year basis in February, the first time that's happened since 2012, but fresh demand in recent weeks may already be altering these conditions, Redfin reported on Friday.
The average price for a home sale dipped by 1.2% to $386,721 last month, as the Federal Reserve's continued rate hikes spurred higher mortgages, keeping buyers at bay and forcing sellers to lower their prices.
In February, 14.2% of homes for sale saw a price cut, more than double last year's rate of 5.7%, as the month saw mortgage rates jump by nearly a full percentage point.
But this month's banking turmoil has changed the outlook as the 30-year fixed mortgage peaked at 6.88% towards February's end then fell to 6.55% by Thursday.
"It's worth noting that the housing market shifted in March following the collapse of Silicon Valley Bank," Redfin said in its report. "Ongoing turmoil in the banking sector lowered the likelihood of the Federal Reserve hiking interest rates much more this year. That caused mortgage rates to drop, which brought more homebuyers back to the market."
In fact, total US mortgage applications rose 6.5% last week alone, according to the Mortgage Bankers Association.
Meanwhile, markets are still expecting the Federal Reserve in increase rates by 25 basis points at next week's policy meeting. But after that, they starting to price in a series of rate cuts later this year.
That's because investors anticipate the central bank will ease up on the tight conditions that contributed to SVB's collapse and are currently putting other regional banks under stress.
The National Association of Realtors has also come to a similar conclusion on mortgage rates and the banking crisis.
"We had expected mortgage rates to come down to the lower range of 6% sometime in the second half of 2023, but now we may see that level in the coming weeks," NAR senior economist Nadia Evangelou told Insider.