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Existing home sales in the United States rose unexpectedly in February as declining mortgage rates and slower house-price growth encouraged buyers to return to the market. According to the National Association of Realtors, sales increased 1.7% month-on-month to a seasonally adjusted annual rate of 4.09 million units, surpassing economists' expectations of a decline. However, the market continues to face supply constraints, with inventory remaining below pre-pandemic levels despite a modest rise. The median existing home price increased 0.3% year-on-year to USD 398,000, while housing supply rose to 1.29 million units. Analysts suggest that although improving affordability and easing borrowing costs have supported demand, limited housing inventory could restrict sales momentum during the spring home-buying season.
Existing home sales in the United States increased unexpectedly in February as easing mortgage rates and moderating house-price growth encouraged more buyers to re-enter the housing market, according to data released earlier this week by the National Association of Realtors (NAR). Advertisement
Sales of previously owned homes rose 1.7% during the month to a seasonally adjusted annual rate of 4.09 million units. The figure exceeded economists' expectations, as a Reuters poll had forecast a decline to an annualised rate of 3.89 million units. Revised data also showed that January sales had declined to a rate of 4.02 million units, higher than the previously reported 3.91 million units.
Housing economists noted that February's activity likely reflected purchase contracts signed in December and January, when mortgage rates had begun to decline after a prolonged period of high borrowing costs.
Despite the monthly increase, overall existing home sales remained 1.4% lower compared with the same period a year earlier, indicating that the housing market continues to face structural challenges including limited supply and affordability pressures.
The median price of an existing home increased slightly, rising 0.3% year-on-year to USD 398,000 in February. While the increase indicates continued price stability, the pace of growth has slowed compared with previous years, offering some relief to buyers.
Lawrence Yun, chief economist at the National Association of Realtors, stated that housing affordability had improved and that buyers were gradually returning to the market. He noted that while housing inventory was increasing, the growth remained slow and insufficient to fully meet demand.
The housing affordability index rose to 117.6 in February from 117.1 in January and was significantly higher than the 103.1 level recorded a year earlier. The NAR reported that affordability improved across all regions compared with last year, with particularly strong gains in the western and southern parts of the country.
Mortgage rates have declined considerably in recent months, helping to improve purchasing conditions for prospective homeowners. Data from Freddie Mac showed that the average rate on a 30-year fixed mortgage stood at around 6% last week, compared with an average of 5.98% in the previous week.
However, analysts suggest that the scope for further mortgage rate declines could be limited amid rising geopolitical tensions in the Middle East. The conflict between Israel and Iran has pushed up oil and gasoline prices, contributing to inflationary pressures and raising yields on U.S. Treasury securities, which typically influence mortgage rates.
Housing supply also showed modest improvement during the month. The inventory of existing homes rose 2.4% to 1.29 million units, representing a 4.9% increase compared with a year earlier. At the current sales pace, the available inventory would take approximately 3.8 months to be exhausted, slightly higher than the 3.6 months recorded a year ago but still below levels considered balanced for the market.
First-time buyers accounted for 34% of total sales, up from 31% a year earlier. All-cash transactions represented 31% of purchases, marginally lower than the 32% share recorded last year. Distressed sales, including foreclosures, accounted for 3% of transactions, unchanged from the previous year.
Source - Reuters
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