Home prices in February posted their first annual decline in a decade

• Home prices fell year-over-year for the first time in a decade last month, NAR reported.

• That drop comes as mortgage rates still hover close to multi-decade highs near 7%.

• Easing rate expectations could help the housing market avoid a crash, NAR's senior economist previously said.

Home prices fell year-over-year in February for the first annual drop in a decade, according to a report from the National Association of Realtors.

The trade association reported that median existing home prices slipped to $363,000 in February, 0.2% lower than what median home prices were in February 2022. That's the first annual decline the market has seen in February 2012, when the market began a 131-month streak of price gains.

Meanwhile, existing home sales jumped 14.5% in February to an annual rate of 4.58 million. That's the largest increase in home sales since July 2020, the NAR said on Tuesday.

"Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines," NAR chief economist Lawrence Yun said in a statement.

The interest rate on the 30-year fixed mortgage has hovered around a 20-year-high, thanks in part to the Fed's aggressive interest rate hikes over the last year, which have influenced what consumers pay for a range of loan products.

Mortgage rates have eased in recent weeks, however, as investors lower their expectations for interest rate volatility. Fed officials are only expected to hike rates 25 basis points at this week's policy meeting, lower than previous estimates of a 50 basis-point hike. Meanwhile, rates on the 30-year mortgage have eased to 6.6%, according to Freddie Mac's most recent market survey, down from a high of 7% over the last year.

Lower rates and lower home prices are increasing affordability in the market, helping rev up demand after a year of slowing activity. Home sales, housing starts, and new home listings cratered in 2022, leading some experts last year to warn of a housing market crash that could bring on a steep correction in home prices.

But Nadia Evangelou, a chief economist at NAR, previously told Insider that she believed easing interest rate expectations would help the market avoid a crash. She estimated that housing sales likely bottomed out in early 2023, with the year overall being a "turning point" for the market.

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