Existing-home sales declined 7.2% in February

Steady price increases, rising mortgage rates impacting market: NAR

Lawrence Yun, chief economist, National Association of Realtors (NAR, iStock)
Lawrence Yun, chief economist, National Association of Realtors (NAR, iStock)

Aiming to lock in low mortgage rates ahead of an anticipated spike, American home buyers went on a shopping spree in January. Last month, the spike arrived, and home sales slowed to their lowest rate in months.

Existing-home sales dropped to a seasonally adjusted 6.02 million in February, down 7.2 percent from January and 2.4 percent from February 2021, according to a monthly report from the National Association of Realtors.

NAR chief economist Lawrence Yun attributed the drop to surging mortgage rates and rising prices driven by low inventory.

“Housing affordability continues to be a major challenge, as buyers are getting a double whammy,” Yun wrote in his report. “Some who had previously qualified at a 3 percent mortgage rate are no longer able to buy at the 4 percent rate.”

The average rate for a 30-year, fixed-rate mortgage hit 3.76 percent in February, up from 3.45 percent in January. Average rates climbed above 4 percent earlier this month and stood at 4.27 percent as of last week, according to the Mortgage Bankers Association.

The median price for existing homes rose 15 percent year-over-year in February, hitting $357,300; up from $350,000 in January. On a year-over-year basis, prices have now climbed every month for a decade: February marked the 120th consecutive month of annual price gains, the longest streak since recording began in 1968.

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There is some promising data on the supply of homes, which has been minimal in recent months. While housing inventory dropped 15.5 percent year-over-year, it increased 2.4 percent from January to 870,000 total units. Unsold inventory also rebounded slightly from January’s record-low of 1.6 months of availability, up to 1.7 months at the current pace of sales.

Sales dropped year-over-year in every region except for the South, where faster job growth resulted in a 3 percent gain in sales over February 2021. The South also saw the highest annual price increase, 18.1 percent to a median of $318,800.

While rising mortgage rates and inflation are harming the checkbooks of prospective homebuyers, a better housing market could be on the horizon: housing starts jumped 22.3 percent from February 2021, according to the U.S. Census Bureau.

“I expect the pace of price appreciation to slow as demand cools and as supply improves somewhat due to more home construction,” Yun wrote.

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