Existing home sales showed a modest uptick in February, with a 1.7% increase from January, leading to a seasonally adjusted annualized rate of 4.09 million units, according to the National Association of Realtors. However, this figure marks a 1.4% decline compared to the same month last year. This rise in sales can be attributed to deals likely closed during December and January, when mortgage rates briefly decreased and stabilized near 6% for 30-year fixed mortgages—a rate that was approximately one percentage point higher a year ago.
Lawrence Yun, the chief economist for the Realtors, expressed concerns over the overall demand for housing, noting that it remains subdued relative to rising wage growth and job creation. He highlighted that, despite the slight increase in sales, wage growth is outpacing home price growth by nearly four percentage points. Furthermore, he pointed out that the labor market has expanded significantly since 2019, adding over six million jobs, yet home sales have decreased by about one million annually.
While lower mortgage rates have slightly improved affordability, the housing market is still facing challenges due to limited inventory. By the end of February, there were 1.29 million units for sale, showing a 2.4% increase from January and a 4.9% rise compared to the same time last year. Despite these increases, the current supply stands at a 3.8-month inventory pace, unchanged from January, with a balanced market typically characterized by a six-month supply.
In response to the slow sales and low consumer confidence that characterized the previous months, many sellers who had delisted their homes last fall are now relisting them. Data from Redfin indicates that nearly 45,000 homes that were previously delisted were reintroduced to the market in January, marking the highest number of relisted properties for that month in a decade. This represents a record 3.6% of homes available in January.
Yun emphasized the necessity of increasing inventory to control home price growth and improve housing affordability. Despite the slow growth in inventory, home prices have managed to hold steady. The median price of homes sold in February was $398,000, demonstrating a marginal 0.3% annual increase. Sales have been particularly strong in the higher price bracket, with properties listed at $1 million or more experiencing the best sales figures, while the lower end of the market has seen significant declines.
The average time on the market for homes has also increased, now taking 47 days to sell, compared to 42 days a year earlier. First-time buyers constituted 34% of total sales, a rise from 31% the previous year, while investor activity remained consistent at 16% of sales.
With the ongoing fluctuations in mortgage rates and the tight inventory landscape, experts suggest that both demand and pricing dynamics will play a crucial role in determining the trajectory of the housing market as it heads into the spring season.
