After one month up, existing-home sales saw numbers go down in February
January provided some optimism, but February existing-home sales numbers brought us back down to earth. The National Association of Realtors® (NAR) reported today that contract activity fell 7.2% last month from January, and was down 2.4% from the year before.
The main culprit for the decline seems to be affordability. Home prices are going up, rates are going up and now potential homebuyers are also seeing costs for daily items going up as well. That’s a lot of pressure on their monthly budget, and makes fitting a new mortgage payment into their spending difficult.
"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 and the market remains swift with multiple offers still being recorded on most properties."
The same sad refrain: Low inventory
Inventory of available home did see a slight improvement in February, up 2.4% from January to 870,000 units. But that is still down 15.5% from a year ago.
This lack of inventory is still pushing home prices up, up, up. The median existing-home price in February was $357,300. Last year, it was $310,600. The streak of months that have seen year-over-year increases in home prices has now reached 120 months.
Homebuyers are in a tough position now. That ~$50,000 increase in home prices is accompanied by mortgage rates that averaged 2.96% in 2021 but hovered around 3.76% in February 2022. And it’s extremely competitive for the few homes that are for sale out there as well:
- Individual investors and second-home buyers made up 19% off all sales
- All-cash sales made up 25% of transactions
- 84% of homes sold were on the market for less than a month
Yun is optimistic that the market tensions will ease in the coming months, making it easier for first-time homebuyers.
"The sharp jump in mortgage rates and increasing inflation is taking a heavy toll on consumers' savings," he said. "However, I expect the pace of price appreciation to slow as demand cools and as supply improves somewhat due to more home construction."
Existing-home sales down across the board
"Employment is vital for housing demand," said Yun. "The Southern states are seeing faster job growth, and consequently, it's the only region to experience a sales gain from a year ago."
- Northeast: down 11.5%—12.7% lower than last year
- Midwest: down 11.3%—1.5% lower than last year
- South: down 5.1%—3.0% higher than last year
- West: down 4.7%—8.3% lower than last year
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