4.2% Monthly Increase Defies Forecasts of a Decline
Sales of previously owned homes in the U.S. rose by 4.2% in February compared to January, reaching an annualized pace of 4.26 million units, according to the National Association of Realtors (NAR). This surprising gain defied analysts’ expectations of a 3% decline.
Despite the monthly jump, home sales were still 1.2% lower compared to February 2024.
Mortgage Rates and Housing Demand
The data reflects closings from contracts signed in December and January, when mortgage rates hovered in the 7% range for a 30-year fixed loan. As of today, rates have eased slightly into the high 6% range.
“Home buyers are slowly entering the market,” said Lawrence Yun, NAR’s chief economist. “Mortgage rates have not changed much, but more inventory and choices are releasing pent-up housing demand.”
Higher-End Market Leads Sales Growth
Sales increased annually only in the highest price tiers:
- Homes priced above $750,000 saw gains.
- Sales around the median price of $398,400 were down 3% year-over-year.
Inventory and Supply Constraints
Available inventory at the end of February stood at 1.24 million units, up 17% from a year ago. However, at the current sales pace, this equates to just a 3.5-month supply, far below the six-month supply considered a balanced market.
“We are still in a relatively tight market condition,” Yun added.
Prices Hit Record February High
The median home price in February was $398,400, reflecting a 3.8% annual increase and marking the highest price recorded for the month.
Buyer and Investor Trends
- First-time buyers increased their market share to 31%, up from 26% last year.
- Investors pulled back, accounting for just 16% of purchases, down from 21% in February 2024.
- All-cash purchases made up 32% of total sales, nearly unchanged from last year.
The lower investor presence suggests that more owner-occupants are paying cash for homes.
Market Outlook Remains Uncertain
While the sales increase was stronger than expected, recent market sentiment surveys suggest that housing demand remains fragile. A February survey by John Burns Research and Consulting found that 53% of real estate agents reported weaker-than-normal spring sales.
“Affordability constraints and economic uncertainty keep many buyers on the sidelines,” the report noted.
