Sunday, June 23, 2024

Existing home sales vaulted 9.5% in February, largest monthly increase in a year

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The housing market showed renewed strength last month as existing home sales posted their largest monthly gain in a year, according to the latest report from the National Association of Realtors. The sizable rebound signals buyers remain actively engaged in the market despite higher mortgage rates and home prices compared to a year ago.

Total existing-home sales - including single-family homes, townhomes, condos and co-ops - vaulted 9.5% from January to a seasonally adjusted annual rate of 4.38 million in February. While still down 3.3% from February 2023's elevated pace, the sharp monthly increase was a welcome pivot after sales had been treading water in recent months.  

"Additional housing supply is helping to satisfy market demand," said NAR Chief Economist Lawrence Yun. "Housing demand has been on a steady rise due to population and job growth, though the actual timing of purchases will be determined by prevailing mortgage rates and wider inventory choices."

The median existing-home sales price spiked 5.7% on an annual basis to $384,500 in February, marking eight consecutive months of year-over-year price increases nationally. Prices rose across all four major U.S. regions, with the Northeast and West posting some of the highest appreciation rates.

In the Northeast, the median price soared 11.5% from the prior year to $420,600, while in the West it jumped 9.1% to $593,000 - the highest regional median price. While representing substantial equity gains for existing homeowners, the relentless price growth is further squeezing affordability for many prospective buyers.

Total housing inventory increased 5.9% from January to 1.07 million units by the end of February. However, that still amounted to just 2.9 months' supply nationally at the current monthly sales pace, down from 3.0 months in January and well below the 6 months considered a balanced market.

Properties typically stayed on the market for 38 days last month, up modestly from 36 days in January and 34 days a year earlier, according to NAR's monthly Realtors Confidence Index survey.

"Due to inventory constraints, the Northeast was the regional underperformer in February home sales but the best performer in home prices," Yun added. "More supply is clearly needed to help stabilize home prices and get more Americans moving to their next residences."

While sales climbed across the more affordable West, South and Midwest regions last month, they remained flat in the pricier Northeast.

Helping to drive overall demand, cash buyers represented an elevated 33% share of transactions in February, up from 32% in January and 28% a year earlier. Individual investors and second-home buyers, who account for many cash sales, purchased 21% of homes, up from 17% in January and 18% in February 2023.

First-time buyers, however, continued to make up a below-average share of 26% in February, down from 28% the prior month and 27% one year ago. NAR's 2023 Profile of Home Buyers and Sellers found the annual share of first-time buyers was 32% last year, the lowest since the association began tracking the data.

Looking ahead, Yun expects home sales to remain choppy in the coming months as buyers grapple with elevated mortgage rates and home prices. The average rate on a 30-year fixed mortgage ticked up again recently to 6.74% as of March 14th after briefly retreating earlier in the year. Rates remain elevated compared to just 6.60% a year ago.  

Any sustained upward trajectory for sales will likely depend on a meaningful expansion in inventory of affordable homes for sale combined with mortgage rates steadying around 6% or lower.

"The jump in February existing-home sales shows the housing market continues to be a bright spot in the broader economy," said Yun. "Additional housing supply gradually becoming available is helping to satisfy robust demand driven by demographic shifts and employment growth across most of the country."

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