In February, sales of previously owned homes experienced a significant 14.5% increase compared to January, with an annualized rate of 4.58 million units, according to a seasonally adjusted count by the National Association of Realtors (NAR). This marked the first monthly gain in 12 months and the largest increase since July 2020. However, sales were still 22.6% lower than in February of the previous year.
The contracts for these sales were likely signed at the end of December and throughout January when mortgage rates had fallen sharply. The average rate on the popular 30-year fixed loan hovered in the low 6% range throughout January, after reaching a high of 7% last fall. This relative drop caused a jump in sales of newly built homes before rates jumped back toward 7% in February. As of March 16, they stood at 6.67%, according to Mortgage News Daily.
"Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines," said Lawrence Yun, chief economist for the Realtors. "Moreover, we're seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs."
For the first time in a record 131 consecutive months, home prices fell on a year-over-year comparison. The median price of an existing home sold in February was $363,000, a 0.2% decline from February 2022. This drop in the median price could indicate that more affordable homes are selling.
Total housing inventory at the end of February was 980,000 units, identical to January, and up 15.3% from a year ago. Unsold inventory sits at a 2.6-month supply at the current sales pace, down 10.3% from January but up from 1.7 months in February 2022. Yun noted that "inventory levels are still at historic lows" and that "multiple offers are returning on a good number of properties."
First-time buyers were responsible for 27% of sales in February, down from 31% in January and 29% in February 2022. All-cash sales accounted for 28% of transactions in February, down from 29% in January but up from 25% in February 2022. Individual investors or second-home buyers, who make up many cash sales, purchased 18% of homes in February, up from 16% in January but down from 19% in February 2022.
In terms of regional breakdown, existing-home sales in the Northeast improved 4% from January, the Midwest experienced a 13.5% growth, sales in the South rose 16%, and in the West, existing-home sales increased by 19%. Median prices varied across regions, with some areas witnessing a decline in median prices compared to the previous year.
The drop in median prices, coupled with lower mortgage rates earlier in the year, has provided an opportunity for homebuyers who have been grappling with the challenges of high mortgage rates and elevated prices. However, with mortgage rates now higher than they were in January, it may be more difficult for some buyers to compete in the market.
