BAM Key Details:
- According to the National Association of REALTORS®, existing home sales increased 14.5% month-over-month in February, breaking a 12-month streak of declines and marking the largest monthly increase since July 2020.
- Year-over-year, however, existing home sales dropped 22.6% and the median existing-home sale price fell 0.2% from a year ago to $363,000.
- Inventory hasn’t changed and mortgage rates continue to fluctuate around 6.6%, discouraging buyers and keeping sellers on the sidelines.
The latest news from the National Association of REALTORS® shows a 14.5% month-over-month increase in existing home sales for February, breaking a 12-month streak of declines and marking the steepest monthly uptick since July 2020 (+22.4%).
That said, year-over-year, existing home sales are down 22.6%. And the median existing-home sale price has dropped 0.2% from a year ago to $363,000.
Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines. Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.
Inventory remains low, discouraging buyers
Total inventory of existing homes remained at 980,000 units at the end of February, unchanged from the month before and up 15.3% year-over-year (850,000). Unsold inventory amounted to 2.6 months’ supply at the going sales pace, down 10.3% from the previous month but up from 1.7 months a year ago.
Inventory levels are still at historic lows. Consequently, multiple offers are returning on a good number of properties.
February saw a record low in new listings for this time of year, almost a third lower than before the pandemic and down 22% from a year ago.
The West Coast had the steepest annual declines in new listings:
- San Jose (-47%)
- Portland (-46%)
- Seattle (-45%)
- Sacramento (-44%)
That slow trickle of new listings is a major contributor to the extremely low levels of total housing inventory—17% higher than the absolute bottom in February 2022 but about 43% lower than pre-pandemic norms.
While inventory grew during the first two months of the year in 2018 and 2019, this year has seen a shrinkage in the number of housing options during those months, limiting buyer options.
This market is not as frenzied as it was during the last two years, but home buyers might start to feel some déjà vu at the dearth of options. Home sellers seem to be sitting out the early spring selling season in surprising numbers.
Mortgage rates remain high, keeping sellers on the sidelines
Homeowners who refinanced their homes in 2020 in 2021, when mortgage rates were at or below 3.5%, are understandably reluctant to trade in their relatively low mortgages for new ones at rates nearly twice that.
As it stands now, the 30-year fixed is hovering around 6.6%, which, while a welcome departure from 7% earlier this month, is still high enough to keep would-be sellers on the sidelines.
Those relatively high rates pose a challenge to both buyers and sellers, according to Zillow’s latest market report. While we’ve seen brief dips in mortgage rates that stimulated demand and intensified competition, so far, they’ve been infrequent and short-lived.
We know there are a lot of motivated buyers looking for homes. When we see mortgage rates fall, sales pick up. But buyers are disappointed in their options. Homeowners aren’t giving up their current house and low monthly payments to join a tight, expensive market. Meanwhile, volatility in the economy makes planning extremely difficult.
Key housing market indicators for February 2023
NAR’s latest report highlighted the following stats for key market indicators:
- The median existing home price—for all housing types—fell 0.2% year over year to $363,000, as prices rose in the Midwest and South but fell in the Northeast and West. That drop ended a 131-month streak of consecutive year-over-year increases—the longest streak on record.
- Properties typically spent 34 days on market in February, up from January’s 33 days and 18 days in February 2022. Of all the homes sold in February, 57% of them spent less than a month on the market.
- First-time buyers accounted for 27% of home sales in February, down from 31% the previous month and 29% a year ago. According to NAR’s 2022 Profile of Home Buyers and Sellers (released in November 2022), the annual percentage of first-time home buyers was 26%, the lowest share since NAR started tracking the data.
- 28% of transactions in February were all-cash sales—down from 29% the previous month but up from 25% a year ago.
- 18% of homes sold in February were purchased by individual real estate investors or second-home buyers—who are responsible for many of those all-cash sales—up from 16% the previous month but down from 19% a year ago.
- 2% of sales in February were distressed sales—i.e., foreclosures and short sales—nearly matching the share from the previous month and from February 2022.
- The 30-year fixed-rate mortgage averaged 6.60% as of March 16, according to Freddie Mac—down from 6.73% from the week prior but up from 4.16% one year ago.
- Single-family home sales rose to a seasonally adjusted annual rate of 4.14 million in February, 15.3% more than January’s 3.59 million but down 21.4% from a year ago. The median price for existing single-family homes was $367,500, falling 0.7% year over year.
- Existing condo and co-op sales reached a seasonally adjusted annual rate of 440,000 in February, up from 410,000 the previous month but down 32.3% year over year. The median price for existing condos was $321,000 in February, up 2.5% from a year ago.
Top takeaways for real estate agents
Between higher mortgage rates and low inventory, buyers are having a tough time finding affordable homes in today’s market. And those who can’t afford to wait rely on knowledgeable professionals like you to help them make the most of all the money-saving options they have.
Sellers who don’t need to move are understandably in no hurry to give up their lower mortgage rates. So as long as those remain north of 5%, inventory will likely remain an issue for buyers.
Stay on top of reports like these and keep in touch with prospective buyers and sellers in your community, so you can alert them to any changes that could get them off the sidelines.
