Second-hand home sales increased 14.5% in February compared to January, according to seasonally adjusted figures from the National Association of Realtors. This will bring annual sales to 4.58 million units.
This was the first monthly increase in 12 months and the largest increase since July 2020, shortly after the Covid-19 pandemic began. However, sales were down 22.6% from February last year.
Since these sales numbers are based on closings, it is likely that the deals were closed in late December to January when mortgage rates dropped sharply. Average interest rates on popular 30-year fixed loans hovered at a low of 6% throughout January after hitting a high of 7% last fall.
The relative decline sent rates jumping to 7% in February after a surge in new home sales.They are not 6.67%, according to mortgage news daily.
“Aware of changes in mortgage rates, homebuyers are taking advantage of lower interest rates,” Lawrence Yun, chief economist at the real estate firm, said in a release. Areas that are adding jobs are seeing a significant increase in sales.”
Rising mortgage rates have driven home prices down since last summer, marking the first time in a record 131 consecutive months (nearly 11 years) that prices have fallen year-on-year. The average price of pre-owned homes sold in February was $363,000, down 0.2% from February 2022.
This lower median price may indicate that the market’s more affordable homes are selling.
Sales might have been even higher had it not been for the extremely low supply situation. Only 980,000 homes were sold at the end of February, flat from January, according to the National Association of Realtors. At the current pace of sales, this equates to 2.6 months of his supply. A balanced market between buyers and sellers is considered a four to six month supply.
“Inventory levels are still at historically low levels,” Yoon added. “As a result, we have had multiple offers coming back on quite a few properties.”
This could start pushing prices up again, but with mortgage rates higher than they were in January, it will make it harder for some buyers to compete.
At a recent open house in Cleveland, Ohio, home shopper Katie Berardi said rising mortgage rates are affecting her and her husband’s affordability.
“Mortgage rates have lowered the initial range that we were looking at. Originally around $440,000, we are now closer to the $300,000 range,” Berardi said.
The house she was touring was originally listed for $450,000, but the listing agent said no one showed up when it first opened and then lowered the price.
“This is a bigger house. I can’t build this house for $450,000 right now. But unfortunately the market didn’t like my idea, so I dropped the price to $350,000. And now I caused a market frenzy,” said Michelle. Santoro, an agent at Russell Realty Services.
All-cash sales accounted for 28% of February transactions, down from 29% in January but up from 25% in February 2022. Retail investors are back, accounting for 18% of buyers, up from 16% in January but down from 19%. February 2022.
Looking at sales at various price points, all are down in the 20% range from last February, with the top $1 million+ segment seeing the biggest drop.
