Existing-home sales, an important measure of the real estate market ahead of the conclusion of the next Federal Reserve Open Market Committee meeting, have reversed a 12-month slide of falling numbers by increasing 14.5% month-over-month to a seasonally adjusted annual rate of 4.58 million units.
While the monthly increase was the largest recorded since July 2020 by the National Association of Realtors (NAR), on a yearly basis sales fell 22.6% from a seasonally adjusted rate of 5.92 million units sold in February 2022.
"Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines," said NAR Chief Economist Lawrence Yun. "Moreover, we're seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs."
Inventory by the end of February was 980,000 units, an identical number from January 2023 and up by 15.3% from one year ago when inventory levels were about 850,000 units. This represents a 2.6-month supply at the current sales rate, a rate which is down 10.3% from January, but up from 1.7 months in February.
"Inventory levels are still at historic lows," Yun added. "Consequently, multiple offers are returning on a good number of properties."
Looking at the median price of existing homes for the month, the median home was valued at $363,000, a decline of 0.2% year-over-year—this downturn, however minute, has ended a streak if 131 consecutive months of year-over-year increases, the longest streak on record. In addition, the average home was sold within 34 days of hitting the market while the majority (57%) sold in less than a month.
First time buyers represented a market share of 27%, down from 31% last month and 29% year-over-year.
Small investors or those who purchase a second home accounted for 18% of the homes sold in February while distressed sales represented 2%.
“Sales of existing homes gained significant ground in February, increasing 14.5% to an annual rate of 4.58 million homes as buyers flocked to the market in response to slightly lower mortgage rates. This month’s surge reversed a 12-month slide in existing home sales, increasing by the largest month-over-month margin since July 2020,” said Hannah Jones, a Economic Data Analyst for Realtor.com. “Pent up housing demand continues to be sensitive to mortgage rate changes as potential buyers take advantage of any improvement in affordability. Sales increased in all four regions month over month, ranging from a 4.0% increase in the Northeast to 19.4% in the West. Despite the month’s progress, existing home sales are still down between 18.7% and 28.3% year over year in all four regions.”
“Home sellers are still in a favorable position to cash in on home equity as prices remain elevated compared to last year, but the dwindling buyer pool makes the task more challenging. Home sales remain well below last year’s level, signaling that significant affordability gains must be made before buyers are able to return to the market en masse.”
“For-sale inventory is recovering, and fewer buyers are in the market, shifting balance back toward home shoppers. Months supply—the number of months it would take to sell all currently unsold homes at today’s sales pace—fell slightly to 2.6 months, 10.3% lower than in January but up from 1.7 months one year ago. Notably, existing home prices notched a 0.2% decrease in February, the first decrease relative to the previous year in 131 months.”
“The spring season is typically accompanied by a thaw in the winter housing market. Historically, both buyer and seller activity picks up as the weather warms and sellers approach the Best Time to Sell, the week that historically sees the best combination of buyer demand, time on market, price and competition,” Jones concluded. “As high prices and elevated mortgage rates continue to stifle buyer activity, this spring’s market is expected to be toned down relative to the last couple of years. However, the housing market remains undersupplied, so well-priced, well-maintained listings are likely to draw buyer attention.”
Bright MLS Chief Economist Dr. Lisa Sturtevant also commented on the report.
“The number of home sales surged in February, reflecting activity in January when falling mortgage rates enticed buyers back into the market to make offers on homes. There was a total of 4.580 million home sales on a seasonally adjusted annual basis, which is a 14.5% jump from a month ago. Despite the increase, sales of existing homes are down more than 30% from a year ago and remain below pre-pandemic levels.
“Home prices fell in February, the first year-over-year decline in the national median home price in more than two decades. Higher mortgage rates have eroded buyers’ purchasing power and prices have taken a hit. But the drop in price is modest, and a lack of supply continues to prop up prices in many housing markets.”
“At the beginning of the year, most signs pointed to a robust rebound and a busy spring housing market. However, economic whiplash has led to greater uncertainty about the spring market. Mortgage rates rose in February as the Federal Reserve signaled more rate hikes to come. But the recent banking crises could lead to a pause on rate hikes and to a reversal in mortgage rates. Prospective homebuyers will be watching rates closely, and we may see volatility in weekly contract activity as people react to ups-and-downs in mortgage rates.”
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