Sales of previously owned homes rose 14.5% in February compared with January, according to a seasonally adjusted count by 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 largest increase since July 2020, just after the start of the Covid-19 pandemic. Sales were, however, 22.6% lower than they were in February of last year.
These sales counts are based on closings, so the contracts were likely signed at the end of December and throughout January, when mortgage rates had fallen sharply. The average rate on the popular 30-year fixed loan hovered in the low 6% range throughout January after reaching a high of 7% last fall.
The relative drop caused a jump in sales of newly built homes, before rates jumped back toward 7% in February. They now stand at 6.67%, according to Mortgage News Daily.
“Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” said Lawrence Yun, chief economist for the Realtors, in a release. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”
Higher mortgage rates have been cooling home prices 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 comparison. The median price of an existing home sold in February was $363,000, a 0.2% decline from February 2022.
That lower median price could be a sign that homes on the more affordable end of the market are selling.
Sales might have been even higher were it not for what is still very low supply. There were just 980,000 homes for sale at the end of February, according to the Realtors, flat compared with January. At the current sales pace, that represents a 2.6-month supply. A balanced market between buyer and seller is considered a 4- to 6-month supply.
“Inventory levels are still at historic lows,” Yun added. “Consequently, multiple offers are returning on a good number of properties.”
This could start to heat 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, home shopper Katie Berardi said higher mortgage rates have had an impact on what she and her husband can afford.
“The mortgage percentage has lowered our original range that we were looking in. Originally it was like $440,000. Now we’re looking more at like the $300,000 range,” said Berardi.
The home she was touring was originally listed at $450,000, but no one showed up at the first open, according to the listing agent, who subsequently slashed the price.
“This is a bigger house; you cannot build this house for $450,000 right now,” said Michelle Santoro, an agent with 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.”
All-cash sales accounted for 28% of transactions in February, down from 29% in January but up from 25% in February 2022. Individual investors returned, making up 18% of buyers, up from 16% in January but down from 19% in February 2022.
When looking at sales at different price points, they were all down in the range of 20% from February last year, with sales down the most in the top, million-dollar-plus segment.