Existing home sales rebounded sharply in February, marking a 4.2% monthly increase, while median prices inched closer to the $400,000 milestone.

With inventory rising but still tight, some analysts say the housing market may be setting up for another leg higher, potentially defying affordability concerns.

According to a report released Thursday by the National Association of Realtors, February’s seasonally adjusted annualized sales rate hit 4.26 million homes. While that's down 1.2% from a year earlier, it marks a notable reversal from recent months of stagnation.

Rising Prices, Tighter Inventory: Recipe For Another Surge?

The median sales price of an existing home climbed 3.8% year-over-year to $398,400, its 20th consecutive month of gains. Even as higher mortgage rates have sidelined some buyers, a persistent housing shortage is keeping pressure on prices.

Inventory has been a persistent issue in the housing market, with the supply of unsold homes rising 5.1% from January to 1.24 million units. At the current sales pace, that represents 3.5 months' worth of supply—a slight improvement but still well below the six-month threshold considered balanced for buyers and sellers.

“Home buyers are slowly entering the market,” said NAR chief economist Lawrence Yun. “Mortgage rates have not changed much, but more inventory and choices are releasing pent-up housing demand.”

Despite rising supply, housing shortages remain a structural issue. Homeowners who locked in ultra-low mortgage rates during the pandemic have been reluctant to sell, constraining inventory and keeping prices elevated.

Each 1% increase in home prices translates into approximately $350 billion in added housing equity for U.S. property owners, Yun said. That's nearly $1.3 trillion in home value appreciation at a time when the stock market is undergoing a correction.

Anomaly Between Housing And Wages

Bravos Research, in a Thursday email, highlighted the extraordinary divergence between home prices and wages.

“U.S. housing’s next big move could shock everyone,” analysts said.

Over the last decade, home prices have jumped 150%, while wages have risen just 57%. In contrast, during the 1980-2003 period, it took 23 years for home prices to climb that much.

"Today, home prices are at the highest levels in history relative to wages, making this one of the most unaffordable housing markets of the last 60 years," Bravos Research noted.

With home prices climbing and affordability worsening, some fear a repeat of the 2008 housing crash. Yet, key differences in debt levels and lending standards suggest otherwise.

A decade ago, the U.S. housing market was propped up by excessive leverage. In 2007, mortgage debt represented 75% of the country's GDP. But today, that figure has steadily declined below 50%, signaling a more stable credit environment.

Unlike the lead-up to the financial crisis, home prices are rising without reckless mortgage lending.

This suggests that, while expensive, housing is not in a speculative bubble fueled by debt, according to Bravos Research.

Could Home Prices Climb Another 50%?

Historically, real estate values and stock markets tend to move in sync. Yet today, while stocks have surged, home prices have lagged.

Bravos Research pointed to a similar divergence in the late 1990s—right before housing prices took off.

“We actually believe home prices can still climb!” the firm said. “This could suggest as much as a 50% rise in home prices over the next few years—comparable to what we saw between 2019 and 2022.”

If history repeats itself, real estate values may be poised for another sharp leg higher.

The Vanguard Real Estate ETF is up nearly 3% year-to-date, outperforming the S&P 500 index, tracked by the SPDR S&P 500 ETF Trust ( SPY ) , which has fallen by 3.5% in the same period.

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