Home sales posted a slight increase at the start of the year, but higher mortgage rates could throw a wrench into the spring season.
According to the National Association of Realtors, existing home sales rose 1.7% in February from January to a seasonally adjusted annual rate of 4.09 million units. Sales fell 1.4% from February last year.
This figure represents completed sales, so the contracts were likely signed in December and January when mortgage rates fell somewhat and remained stable in a low range near 6% for the 30-year fixed mortgage. Interest rates were about a full percentage point higher last year.
“Despite the modest increase in home sales, actual housing demand remains subdued relative to wage growth and employment gains,” Lawrence Yun, chief economist at the brokerage, said in a news release. “Wage growth now exceeds property price growth by almost four percentage points. Mortgage interest rates are also measurably lower compared to the previous year.”
Yun also noted that there are now more than 6 million more jobs than in 2019, but home sales are declining by 1 million per year.
Lower mortgage rates have helped improve affordability slightly, but low inventory levels are still a significant headwind. There were 1.29 million units for sale at the end of February, up 2.4% from January and 4.9% from February 2025. At the current sales pace, that represents a 3.8-month supply, unchanged from January. A six-month supply is considered a balanced market between buyer and seller.
More sellers who withdrew their homes last fall due to slower sales and weak consumer confidence are now relisting their homes, according to Redfin, a real estate brokerage. Nearly 45,000 homes that were taken off the market last year were put back up for sale in January. That’s the highest January reading since Redfin began tracking the metric a decade ago and represents a record 3.6% of homes on the market in January.
“Inventory is growing, but slowly,” Yun said. “If demand picks up significantly in the coming months and outstrips supply growth, house prices will inevitably rise. That’s why increasing supply is so important to limit the rise in house prices, improve housing affordability and boost transactions.”
However, the limited supply means that prices hardly rise. The median price of a home sold in February was $398,000, up 0.3% year-over-year. Sales continue to be strongest in the highest price category, that is, properties listed for $1 million or more. At the bottom end of the market, sales fell sharply.
Selling a home continues to take longer at 47 days, compared to 42 days a year ago. First-time buyers accounted for 34% of total sales, up from 31% last year. The share of investors in sales was 16%, unchanged from the previous year.
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