According to the National Association of Realtors, sales of homes previously owned rose 14.5% in February over January. This resulted in sales of 4.58 million units annually.
This was the first month-to-month increase in sales and the biggest increase since July 2020, shortly after the beginning of The Covid pandemic. However, sales were 22.6% less than in February last year.
These sales figures are based upon closings. The contracts were most likely signed at December’s end and in January, when mortgage rates had dropped sharply. After reaching a peak of 7% last fall, the average rate for the popular 30-year fixed loan was in the low 6% area throughout January.
This relative drop led to a surge in the sales of newly constructed homes. Rates had jumped back up to 7% in Febuary. According to Mortgage News Daily, they now stand at 6.7%.
Lawrence Yun, chief economist at the Realtors, stated that home buyers are aware of changes in mortgage rates and taking advantage of rate drops. We are also seeing higher sales gains in areas with lower home prices and where local economies are creating jobs.
Higher mortgage rates have been lowering home prices from last summer. Prices were also lower for the first time ever in 131 consecutive months — almost 11 years — compared to a year ago. In February, the median home price was $363,000. This is a 0.2% decrease from February 2022.
The lower median price could indicate that homes at the more affordable end are being sold.
If it weren’t for the still low supply, sales might have been higher. According to the Realtors, there were only 980,000 homes available at February’s end, which was flat compared to January. This is a 2.6 month supply at the current pace of sales. A 4- to 6-month supply is defined as a market that is balanced between seller and buyer.
Yun stated that inventories are still at historic lows. Yun stated that multiple offers have been made on a number of properties.
This could heat up prices again, however mortgage rates are now higher than in January making it harder for buyers to compete.
Katie Berardi, a home buyer in Cleveland, Ohio stated that higher mortgage rates have affected her and her husband’s ability to afford their house.
“The mortgage percentage has reduced our range of options that we were considering. It was originally $440,000. Berardi said that we now look at the $300,000.
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She was initially listed for $450,000. However, no one came to the first open according to the listing agent who later reduced the price.
Michelle Santoro, a Russell Realty Services agent, stated that “This is a larger house; you cannot construct this house right now for $450,000.” “But unfortunately, my ideas were rejected by the market so we lowered to $350,000 and now I have a market frenzy.”
In February, 28% of transactions were made in cash. This is down from 29% in Jan but up from 25% February 2022. Individual investors made up 18% of buyers in February, up from 16% in Jan, but down from 19% by February 2022.
Sales at all price points were down by 20% compared to February 2013. The lowest sales was in the top segment, which is worth more than a million dollars.
