Home sales spike in February, median price drops

Existing Home Sales up 14.5% in February

February home sales rose 14.5% from January, according to a seasonally adjusted census by the National Association of Realtors. This put sales at an annualized rate of 4.58 million units.

It was the first monthly gain in 12 months and the biggest rise since July 2020, just after the start of the Covid-19 pandemic. However, sales were down 22.6% from February last year.

These sales numbers are based on deals, so the deals were likely signed in late December and January when mortgage rates were falling sharply. The average interest rate on the popular 30-year term loan hovered in the low 6% range throughout January, after peaking at 7% last fall.

A “For Sale” sign outside a home in Atlanta, Georgia on Friday, February 17, 2023.

Dustin Chambers | Bloomberg | Getty Images

The relative decline prompted a surge in new home sales before rates rebounded towards 7% in February. They’re now at 6.67%, according to Mortgage News Daily.

“Homebuyers are aware of changing mortgage rates and are benefiting from rate declines,” Lawrence Yun, chief economist at Realtors, said in a press release. “In addition, we are seeing stronger sales growth in areas where property prices are falling and the local economy is creating jobs.”

Higher mortgage rates have been cooling house prices since last summer, and for the first time in a record 131 straight months – almost 11 years – prices have been lower year-on-year. The median price of an existing home sold in February was $363,000, down 0.2% from February 2022.

This lower average price could be a sign that homes are selling at the cheaper end of the market.

Sales could have been even higher if it hadn’t been for the still very low supply. According to real estate agents, there were only 980,000 homes for sale at the end of February, flat compared to January. At the current pace of sales, that equates to 2.6 months of supply. A balanced market between buyer and seller is considered a 4 to 6 month delivery.

“Inventory levels are still at historic lows,” Yun added. “As a result, multiple offers are coming back for a good number of properties.”

This could push prices higher again, but with mortgage rates now higher than they were in January, some buyers are finding it harder to hold their own.

At a recent open house in Cleveland, Ohio, home shopper Katie Berardi said higher mortgage rates are affecting what she and her husband can afford.

“The mortgage percentage lowered our original range that we examined. It was originally about $440,000. Now we’re looking more towards the $300,000 area,” Berardi said.

The home she toured was originally listed at $450,000, but no one showed up when it first opened, according to the listing agent, who subsequently lowered the price.

“This is a bigger house; You can’t build that house for $450,000 right now,” said Michelle Santoro, an agent at Russell Realty Services. “But unfortunately the market just didn’t like my thoughts so we went back to $350k and now I’ve triggered a market frenzy.”

Cash sales accounted for 28% of transactions in February, down from 29% in January but up 25% in February 2022. Retail investors returned and made up 18% of buyers, up from 16% in January but down from 19% in February 2022.

Looking at sales at various price points, they were all down in the 20% range compared to February of last year, with sales in the high-million dollar bracket falling the most.