A for sale sign displayed in front of a home on February 22, 2023 in Miami, Florida.
Joe Raedle | Getty Images
Higher mortgage rates took some of the steam out of the housing recovery in February.
After a sharp rise in January, pending home sales rose just 0.8% month-on-month, according to the National Association of Realtors. Sales were 21.1% lower than in February last year. Pending sales are based on signed contracts during the month.
Mortgage rates shot up in February after falling sharply in January. According to Mortgage News Daily, the average interest rate on the popular 30-year fixed-rate mortgage started February at about 6% and ended the month at just over 7%. This gave homebuyers significantly less purchasing power.
Regionally, month-on-month sales rose in all regions except the West, where they fell 2.4%. That’s probably because the West is the most expensive region to live in and buyers there are the most trying to afford their own home. Any increase in mortgage rates would have an outsized effect there.
“Affordable US regions — the Midwest and the South — are leading the recovery,” Yun added. “Mortgage rates have improved in recent weeks after the federal government guaranteed the status of most mortgages amid financial market uncertainty,” Lawrence Yun, the Realtors’ chief economist, said in a press release. “While commercial mortgage lending may become increasingly difficult to access, residential mortgage lending is expected to become more readily available.”
Home prices have fallen significantly since last summer, but housing is still expensive by historical standards. The price decline may have stalled in January as well due to the surge in buyer demand. Real estate agents reported anecdotally of further bidding wars in January given the still very tight supply.