Home sales slip in February, prices jump 15% annually

Existing home sales slid 7.2% in February across all regions, compared to January, and fell 2.4% from a year ago, according to the National Association of Realtors (NAR). The median home sales price jumped 15% from a year ago, hitting $357,300, the 120th consecutive month of annual price increases (the longest streak on record).

Inventory levels loosened slightly rising to 870,000 units, the equivalent of 1.7 months of supply at the current monthly sales pace.

These conditions continue to plague housing affordability, which is particularly frustrating for first time home buyers who are pre-approved, with down payment in hand, ready to buy, but continue to be squeezed out of the market.

“Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases,” said Dr. Lawrence Yun, NAR’s Chief Economist. “Some who had previously qualified at a 3% mortgage rate are no longer able to buy at the 4% rate.”

But it’s not just about affordability.

“Monthly payments have risen by 28% from one year ago,” said Dr. Yun, “which interestingly is not a part of the consumer price index – and the market remains swift with multiple offers still being recorded on most properties.”

Moving forward, Dr. Yun asserts that inflation will continue to hit consumers’ savings, but expects the pace of price appreciation to slow as demand cools and housing supply improves (if housing starts continue to improve).

The average days on market shrank again, down to 18 days in February, from 19 in January, and 20 in February 2021. That sounds promising, but with 84% of all homes sold in February staying on the market for under a month.

One bright spot of the report was the uptick in first-time buyers which accounted for 29% of sales in February, having dipped down to 27% in January.

Meanwhile, all-cash sales accounted for 25% of transactions in February, down from 27% in January (yet up from only 22% in February 2021). Talk about mixed news for first time buyers.

Regionally, existing home sales fell 11.5% in February in the Northeast, 11.3% in the Midwest, 5.1% in the South, and 4.7% in the West.

Mortgage Bankers Association (MBA) Chief Economist, Dr. Mike Fratantoni said, “It is tempting to blame the decline on the recent run-up in mortgage rates. However, given that last month’s sales numbers represent closings, the decline in sales came at a time earlier this year when rates were lower. The more likely reasons for the drop in sales were the ongoing lack of housing inventory and the resulting increase in home values that priced some buyers out of the market.”

He concluded that, “From a lending perspective, while the number of sales declined somewhat, with 15% home-price growth, the dollar volume of sales and purchase originations have increased over the past year.”