Existing-home sales fell by 7.2% in February, furthering the volatility pattern of the past few months in residential real estate, according to the National Association of REALTORS® (NAR) latest report. All four U.S. regions experienced lower month-over-month sales in February. Likewise, year-over-year sales were down a total of 2.4% overall, with the South being the only region that saw an increase in transactions.
Key findings:
- Completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 7.2% from January to a seasonally adjusted annual rate of 6.02 million in February. Year-over-year, sales decreased 2.4% (6.17 million in February 2021).
- Total housing inventory at the end of February totaled 870,000 units, up 2.4% from January and down 15.5% from one year ago (1.03 million).
- Unsold inventory is at a 1.7-month supply at the current sales pace. This is up from the record-low supply in January of 1.6 months and down from 2.0 months in February 2021.
- The median existing-home price for all housing types was $357,300, up 15.0% from February 2021 ($310,600). This marks 120 consecutive months of year-over-year increases, the longest-running streak on record.
- Properties typically remained on the market for 18 days in February, down from 19 days in January and 20 days in February 2021. Eighty-four percent of homes sold in February 2022 were on the market for less than a month.
- First-time buyers were responsible for 29% of sales in February, up from 27% in January and down from 31% in February 2021. NAR’s 2021 Profile of Home Buyers and Sellers—released in late 2021—reported that the annual share of first-time buyers was 34%.
- Individual investors or second-home buyers, who make up many cash sales, purchased 19% of homes in February, down from 22% in January but up from 17% in February 2021. All-cash sales accounted for 25% of transactions in February, down from 27% in January and up from 22% in February 2021.
- Distressed sales—foreclosures and short sales—represented less than 1% of sales in February, equal to the percentage seen in both January 2022 and February 2021.
- The largest year-over-year median list price growth occurred in Las Vegas (+39.6%), Miami (+31.6%) and Tampa (+31.5%). Austin posted the highest growth in the share of homes, which had their prices reduced compared to last year (+3.3 percentage points), followed by Milwaukee (+2.1 percentage points), Pittsburgh and Baltimore (+1.4 percentage points each).
- Single-family home sales jumped to a seasonally adjusted annual rate of 5.35 million in February, down 7.0% from 5.75 million in January and down 2.2% from one year ago.
- The median existing single-family home price was $363,800 in February, up 15.5% from February 2021.
- Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 670,000 units in February, down 9.5% from 740,000 in January and down 4.3% from one year ago. The median existing condo price was $305,400 in February, an annual increase of 10.9%.
Regional breakdown:
In the Northeast, existing-home sales fell 11.5% in February, equaling an annual rate of 690,000, a 12.7% drop from February 2021. The median price in the Northeast was $383,700, up 7.1% from one year ago.
The Midwest saw a similar decline of 11.3% from the prior month to an annual rate of 1,330,000 in February, a 1.5% decrease from February 2021. The median price in the Midwest was $248,900, a 7.5% climb from February 2021.
The South fell 5.1% in February from the prior month, posting an annual rate of 2,790,000, an increase of 3.0% from one year ago. The median price in the South was $318,800, an 18.1% jump from one year prior. For the sixth straight month, the South experienced the highest pace of price appreciation compared to the other regions.
The West slid 4.7% from the previous month, reporting an annual rate of 1,210,000 in February, down 8.3% from one year ago. The median price in the West was $512,600, up 7.1% from February 2021.
The takeaway:
“Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases,” said 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. Monthly payments have risen by 28% from one year ago—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.
The sharp jump in mortgage rates and increasing inflation is taking a heavy toll on consumers’ savings. However, I expect the pace of price appreciation to slow as demand cools and as supply improves somewhat due to more home construction.”
“For the past couple of years, buyers have had to contend with a market of high demand, low inventory and a mix of uncertainties with COVID-19 protocols,” said NAR President Leslie Rouda Smith, a REALTOR® from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas. “Consumers are presently challenged with higher mortgage rates, so now, more than ever, interested buyers need the trusted expertise of REALTORS® in order to navigate this current market.”
“Existing home sales lost some momentum in February, stepping down from January’s 6.5 million pace. Rising mortgage rates, which neared 4% in February but didn’t breach that threshold until this week, continue to keep homebuyers motivated even in the face of record-low numbers of homes actively for-sale,” said realtor.com Chief Economist Danielle Hale. “As consumers widely anticipated this week’s Fed rate hike, they had a strong incentive to act quickly on listed homes when submitting new offers and to follow-through on pending deals.
While this week’s Fed move was relatively modest, the accompanying statement and projections—collectively referred to as “forward guidance”—signal that the Fed will be taking a much more assertive stance on inflation. This will be a mixed bag for the many young households at key first-time buying ages, who will face challenges getting a foot into the literal and proverbial homeownership door. Higher mortgage rates will raise costs and likely dampen previously frenzied demand, but double-digit rent growth also provides a meaningful reason for would-be first-time home buyers to keep shopping.
The recent ramp up in new home construction will help add much needed supply to the market. Our expectation is that home sales will remain relatively high throughout 2022, as homebuyers get creative about how to spend their housing budget amid rising prices of competing expenses like energy, food and childcare, driven up by inflation. So far, buyer activity has been resilient to the extra costs of homeownership, but demand will be tested by an extraordinary year.”
“Existing-home sales declined in February on both a monthly and annual basis,” said Mike Fratantoni, SVP and Chief Economist of the Mortgage Bankers Association. “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. 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.”
He added, “The only real good news in the report is the slight increase in the share of sales going to first-time homebuyers. As we have emphasized, the strength of the 2022 housing market is dependent upon the wave of millennial homebuyers reaching peak first-time homebuyer age and finding a way into this booming housing market. We are hopeful that the small increase in inventory and slight slowing of home price growth seen in February will continue through this spring buying season.”
For more information, visit: nar.realtor.
