Existing home sales rose 14.5% in February compared with January, according to a seasonally adjusted count from the National Association of Realtors. That put sales at an annualized rate of 4.58 million units.
It was the first monthly gain in 12 months and the biggest increase since July 2020, just after the start of the Covid pandemic. However, sales were 22.6% lower than in February of last year.
These sales counts are based on closings, so the contracts were probably signed in late December and all january when mortgage rates had fallen dramatically. The average rate on the popular 30-year fixed loan hovered in the low 6% range throughout January after peaking at 7% last fall.
The relative decrease caused a jump in the sales of new construction homes, before the rates jumped towards 7% in February. Now they stand at 6.67%, according to Daily Mortgage News.
“Cognizant of changes in mortgage rates, homebuyers are taking advantage of any rate declines,” Lawrence Yun, chief economist at Realtors, said in a statement. «In addition, we are seeing stronger sales gains in areas where home prices are declining and local economies are adding jobs.»
The highest mortgage rates have been House prices cooling since last summer, and for the first time in a record 131 consecutive months, nearly 11 years, prices were lower on a year-over-year basis. The median price of an existing home sold in February was $363,000, a 0.2% decrease from February 2022.
That lower median price could be a sign that homes at the more affordable end of the market are selling.
Sales could have been even higher were it not for what is still a very low offer. There were only 980,000 homes for sale at the end of February, according to Realtors, unchanged from January. At current sales rates, that represents a 2.6-month supply. A balanced market between buyer and seller is considered a 4-6 month supply.
“Inventory levels are still at record lows,” Yun added. «As a result, multiple offers are coming back on a good number of properties.»
This could start to heat up prices again, but with mortgage rates now higher than they were in January, it will be harder for some buyers to compete.
At a recent open house in Cleveland, Ohio, homebuyer Katie Berardi said that higher mortgage rates have had an impact on what she and her husband can afford.
“The percentage of the mortgage has lowered our original range that we were looking for. Originally it was like $440,000. Now we are looking at more like the $300,000 range,” Berardi said.
The house he was touring for was originally listed for $450,000, but no one showed up at the first opening, according to the listing agent, who subsequently lowered the price.
“This is a bigger house; You can’t build this house for $450,000 right now,” said Michelle Santoro, an agent for Russell Realty Services. «But unfortunately the market just didn’t like my thoughts so we went down to $350,000 and now I’ve created a market frenzy.»
Cash sales accounted for 28% of transactions in February, down from 29% in January but up from 25% in February 2022. Individual investors returned, accounting for 18% of buyers, up from 16% in January but below 19% in February 2022.
When looking at sales at different price points, they were all down in the 20% range from February of last year, with the lowest sales in the $1 million-plus premium segment.