In an unexpected turn of events, existing home sales in the United States surged in February to the highest level in a year, defying expectations of a slight decline. According to data from the National Association of Realtors (NAR), sales of existing homes, including single-family homes, townhomes, condominiums, and co-ops, rose by a notable 9.5% from January to a seasonally adjusted annualized rate of 4.38 million units.
This surge in sales marks the second consecutive month of rising home sales and represents the largest monthly increase since February 2023. Lawrence Yun, the chief economist at NAR, emphasized the role of increased housing supply in meeting market demand. He noted that while housing demand has been steadily rising due to population and job growth, the timing of purchases remains contingent on prevailing mortgage rates and the availability of inventory options.
The unexpected increase in home sales is particularly noteworthy considering the backdrop of surging mortgage rates during the same period. Despite the uptick in mortgage rates, buyers appear to be returning to the market, driving the resurgence in home sales. Lawrence Yun remarked that the rebound in inventory has been long overdue, with some homeowners finally deciding to move despite the prospect of giving up low mortgage rates.
Yun explained that over the past two years, many individuals who would typically have moved delayed their plans, unwilling to relinquish their low mortgage rates. However, with mortgage rates unlikely to return to ultra-low levels seen before the Federal Reserve's interest rate hikes in 2022, homeowners are now confronting the reality of higher rates as they consider their housing decisions.
The median national price of an existing home also saw a substantial increase, rising by 5.7% from the previous year to reach $384,500 in February. This uptick represents a larger annual rise compared to the prior month and marks the highest median home price for any February on record.
The rebound in housing inventory has provided buyers with more choices and alleviated some of the pressure in what had been a historically tight market. Yun noted that the increase in inventory reflects the realization among homeowners that delaying moves indefinitely is no longer feasible, especially as mortgage rates remain above levels seen in the pre-2022 era.
While mortgage rates have moderated slightly from their recent highs, economists do not anticipate a return to the ultra-low rates of the past. The 30-year fixed-rate mortgage averaged 6.74% in the week ending March 14, according to data from Freddie Mac, suggesting that rates are likely to remain elevated throughout the year.
Despite the resurgence in home sales and the increase in housing inventory, challenges persist, particularly for first-time buyers. The proportion of first-time buyers in February declined to 26%, below the historical norm of around 40%. Additionally, all-cash sales accounted for 33% of transactions, indicating ongoing competition in the market.
