The US housing market witnessed an unexpected surge in home sales last month, defying the escalating mortgage rates that have been a cause for concern among potential homebuyers. According to the National Association of Realtors (NAR), sales of previously owned homes jumped by 9.5% in February, reaching a seasonally adjusted annualized rate of 4.38 million units, marking the highest level of activity in this sector in a year.
This increase in home sales is particularly noteworthy given the backdrop of soaring mortgage rates observed in February, which had raised apprehensions about the potential dampening effect on buyer enthusiasm. Lawrence Yun, NAR's chief economist, attributed this surge in sales to an uptick in housing supply, stating, "Additional housing supply is helping to satisfy market demand." He further noted the steady rise in housing demand, driven by factors such as population and job growth, though he also acknowledged that the timing of purchases is largely influenced by the prevailing mortgage rates and the availability of wider inventory choices.
One of the key drivers behind last month's notable increase in home sales was the substantial rise in the number of homes entering the market. The total housing inventory in February saw a 5.9% rise from the previous month, totaling 1.07 million units. This represents a significant 10.3% increase from the same period last year, offering buyers a greater selection and alleviating the pressure from a historically tight market.
Yun emphasized the long-overdue rebound in inventory during a conference call with reporters, explaining that many Americans had been postponing their moving plans due to reluctance to relinquish their low mortgage rates. "What happened in the past two years when we had a historically low inventory level is that many people who would have moved in normal circumstances just delayed," he explained. However, with mortgage rates unlikely to return to the ultra-low levels seen prior to the Federal Reserve's interest rate hikes in 2022, homeowners are facing the reality that they can no longer delay their moving plans.
The impact of higher demand was also reflected in the median price of existing homes, which rose by 5.7% from the previous year to $384,500, marking the highest median home price for any February on record. Despite this, the market remains competitive, with 20% of homes selling above the list price, indicating the enduring strength of buyer competition.
The increase in sales was most pronounced in the West, with a 19.4% surge, and the South, with a 16.4% rise. The Northeast, however, saw no change in sales. This regional variation underscores the diverse dynamics at play across the country's housing markets.
First-time buyers, however, did not experience the same surge as the overall market, representing just 26% of buyers in February, a decrease from 28% in January. This deviation from the historical norm of around 40% highlights the ongoing challenges faced by this demographic in entering the housing market.
