February Home Sales Defy Expectations Amid Economic Uncertainty
Despite predictions of a decline, sales of previously owned homes in the United States showed positive momentum in February. According to data from the National Association of Realtors (NAR), there was a notable 4.2% increase in sales from January, translating to an annualized rate of 4.26 million units. This uptrend stands in sharp contrast to the anticipated 3% drop.
Year-Over-Year Comparisons
However, when compared to February of the previous year, sales are down by 1.2%. These figures reflect closings based on contracts signed during December and January, a period characterized by fluctuating mortgage rates, which briefly exceeded 7% for the 30-year fixed loan option. Currently, the rates are hovering in the high 6% range.
Market Dynamics
Lawrence Yun, the chief economist for NAR, remarked, “Home buyers are slowly entering the market. Mortgage rates have not changed much, but more inventory and choices are releasing pent-up housing demand.” This indicates a gradual resurgence of interest from buyers as inventory levels rise.
At the close of February, total home inventory reached 1.24 million units, representing a substantial 17% increase from the previous year. However, this supply equates to only 3.5 months based on the current sales rate, underscoring the persistent tightness in the housing market. A balanced market typically has around a six-month supply.
Impact on Home Prices
This restricted supply continues to exert upward pressure on home prices. The median sales price for homes in February reached $398,400, marking a 3.8% increase compared to the same month last year, and setting a record for February prices. All four major regions across the country experienced price hikes.
Buyer Trends
Interestingly, the profile of home buyers is shifting, with first-time buyers comprising 31% of the total market share, up from 26% the previous year. Conversely, investor participation has declined significantly, now accounting for only 16% of sales, down from 21% a year ago.
The proportion of all-cash transactions remained stable at 32%, slightly lower than last year, suggesting that as investor participation decreases, more owner-occupants are leveraging cash purchases.
Future Outlook
While February’s sales figures surpassed expectations, they primarily reflect market conditions from the previous months. A survey conducted by John Burns Research and Consulting indicated that more than half of real estate agents reported weaker than normal sales for the season. The resale index has dropped for the first time in four months, reflecting ongoing challenges.
The survey revealed that 53% of real estate agents noted weaker activity compared to historical averages, a slight improvement from 56% one year prior but worse than the 47% reported in January. The findings emphasize that affordability issues and economic uncertainty continue to keep many potential buyers from entering the market.
