Existing Home Sales bounce back in February
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Summary
Home buying limited by elevated mortgage rates and high prices
Existing home sales beat expectations and rose 4.2% in February. The rebound from January's decline indicates poor weather may have temporarily depressed home buying at the start of the year. Through the monthly volatility, February's 4.26 million-unit pace of sales represents a 1.2% year-to-year decline. All told, resales continue to run at a slow pace on account of persistent affordability challenges. For more on our expectations for the residential sector, please see our latest outlook for the housing market published this week.
Affordability challenges aren't going away soon
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Existing home sales rose 4.2% in February, providing some giveback from the 4.7% drop in January. Despite the improvement, sales are down 1.2% over the year and the overall pace remains nearly 25% below the rate in February 2020.
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February's improvement was entirely driven by a 5.7% uptick in single-family transactions. Condo and co-op resales fell 9.8% over the month.
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Mortgage rates have receded somewhat in recent weeks, most recently averaging 6.65% the week of March 13 according to Freddie Mac. Although still elevated, this rate is nearly 40 basis points below the most recent high of 7.04% reached in mid-January.
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We expect mortgage rates to remain elevated over the next few years, which will continue to suppress resale supply by keeping the mortgage rate lock-in effect firmly in place. Although single-family inventories have grown 17.2% over the past 12 months, resale listings were 15.5% lower in February than five years ago.
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Scarce resale supply is keeping a floor under price growth, adding to affordability challenges. The median single-family sales price was $402.5K in February, 3.7% higher than February 2024.
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The uptick in February was entirely driven by increased home buying in the South and West, where greater supply has prompted softer price appreciation. Single-family resale prices were up 1.7% annually in the South and 3.6% annually in the West, weaker than the national average.
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