Home Sales Jump 4.2 Percent in February: Report

Mortgage rates remained below the 7 percent level for nine straight weeks, ‘which is helpful for potential buyers and sellers alike,’ an economist says.

A sign is posted in front of a home for sale, in San Francisco on May 11, 2023. Justin Sullivan / Getty Images

The number of homes sold across the United States rose in February from a month earlier amid an improvement in housing inventory, according to the National Association of Realtors (NAR).

Total existing-home sales rose by 4.2 percent from January to hit 4.26 million units in February on a seasonally adjusted annual rate, NAR said in a March 20 statement. Sales include completed transactions of single-family homes, condominiums, townhomes, and co-ops.

At the end of February, total housing inventory was at 1.24 million units, up 5.1 percent from a month back. At the current pace of sales, this is worth 3.5 months of supply.

“Home buyers are slowly entering the market,” said NAR Chief Economist Lawrence Yun. “Mortgage rates have not changed much, but more inventory and choices are releasing pent-up housing demand.”

The average weekly rate on a 30-year fixed-rate mortgage fell marginally last month, from 6.95 percent at the end of January to 6.76 percent for the week ending Feb. 26.

Region-wise, existing home sales declined on a monthly basis in the Northeast, rose in the South and West, and remained unchanged in the Midwest.

As for prices, “the median existing-home sales price rose 3.8 percent from February 2024 to $398,400, the 20th consecutive month of year-over-year price increases,” according to NAR.

While mortgage rates have risen for the past two weeks, the increase has been minimal. Between the week ending March 5 and 19, the weekly average rate rose from 6.63 percent to 6.67 percent.

Sam Khater, chief economist at Freddie Mac, said that mortgage rates have “stayed under 7 percent for nine consecutive weeks, which is helpful for potential buyers and sellers alike.”

In a March 20 market report, real estate marketplace Zillow highlighted that existing home sales had declined on an annual basis in February even though rates during these two periods were roughly similar. Year over year existing home sales fell by 1.2 percent last month, according to NAR.

“The combination of rising inventory and falling sales—despite comparable mortgage rates—is a signal that buyers are increasingly cautious,” the report said.

Total housing inventory by February-end was up 17 percent year over year.

“Many may be waiting for list prices to fall, confronting insurance costs, or seeking to build up larger down payments to avoid burdensome mortgage payments,” the report said.

Mortgage Rates

The trajectory of mortgage rates is influenced by the U.S. Federal Reserve’s policies regarding benchmark interest rates.

In its recent meeting, the central bank kept interest rates unchanged for the second consecutive time after cutting down rates multiple times last year.

Lisa Sturtevant, chief economist at real estate data company Bright MLS, said in a March 19 commentary that lower interest rates are good news for home buyers waiting for mortgage rates to fall.

“But if rates come down because the labor market is weaker and people are worried about their jobs, those lower mortgage rates won’t be able to bring as many homebuyers into the market,” Sturtevant wrote.

“So, it’s not just about when the Fed cuts rates, but rather what the overall economic picture looks like. Right now, in this challenging environment, the Fed is trying to ‘separate sound from the noise’ to gauge where the economy is headed.”

She said the Fed continues to project two rate cuts this year, adding that economic factors determining the central bank’s decision-making regarding rate reductions have changed.

For instance, in December, the central bank’s rate cut expectations were tied to its projections related to economic soft landing and inflation.

But now, “the Federal Reserve is watching declining consumer confidence and weakening economic conditions, meaning it may be looking at rate cuts to help stave off a potential economic downturn,” she said.

Meanwhile, a recent report from Morgan Stanley predicts mortgage rates to decline this year together with a drop in Treasury yields. Home prices may decrease marginally as supplies rise, the report said. The decline is expected to extend to 2026 as well.

“The potential declines could translate to improvements in housing affordability. For example, for a $1 million home, the monthly cost today could be $5,322 at a 7 percent rate, versus $4,925 at a 6.25 percent rate—roughly a $397 monthly difference,” the report said.