The housing market slowed in February, more than expected.
Existing home sales, according to the National Association of Realtors (NAR), fell 6.6% to a seasonally adjusted 6.22 million in February from a month earlier. The existing home sales in January were slightly revised to 6.66 million from 6.69 million. According to Bloomberg’s consensus estimates, the decline far exceeded the expected decline of 2.8%.
“Despite the decline in home sales for February – which I would attribute to a historically low inventory – the market is still better than pre-pandemic levels,” said Lawrence Yun, chief economist at NAR.
Despite the decline, the NAR noted that sales rose 9.1% last month from February 2020, which was before the COVID-19 pandemic swept through the US. The existing home sales are already more than the total number of sales of 5.6 million units, for the entire year of 2020, Yun said.
“The road ahead looks promising. After the gradual retreat to start the year, the signs of buyer activity – especially the level of mortgage applications – have recovered over the past few weeks, indicating that many homebuyers are going to get a boost on what promises to be a busy spring season, “Zillow economist Matthew Speakman said in a press release after the results.” What’s more, improvements in the economy and continued distribution of the COVID-19 vaccine should encourage more homeowners to put houses on the market. “
The number of homes for sale, also known as inventory, fell to a record low of 1.03 million units, the same as in January, according to revised data. It was 29.5% lower than a year ago – the biggest annual drop on record. Usually you see an increase in stock from January and February, but according to Yun, this has not happened this year.
The average price for existing homes in February was $ 313,000, 15.8% higher than in February 2020, as prices rose in each region. The national price increases in February are 108 direct months of year-on-year gains.
“This is quite a dramatic drop. That is why the price is rising, the demand is very strong and is reflected in days on the market,” Yun said during a press conference announcing the results. “We need more inventory to tame price growth.”
Properties typically stayed on the market for 20 days in February, down from 21 days in January and from 36 days in February 2020 – the fastest pace since NAR began tracking how many days units remain on the market. Seventy-four percent of the homes sold in February 2021 were on the market in less than a month. A year ago, there was a 3.1-month inventory.
“Even with this decline, sales will still be well above the pre-pandemic interest rate,” Credit Suisse wrote in a comment before the results. ‘Existing home sales have recently outperformed negative signals in the pending home sales data, which have declined by 5.7% since August 2020, but we expect the two series to merge. The sentiment of homeowners, reflecting the outlook on the housing market outlook, has also declined slightly over the past few months. ”
Yun warned that demand could recede in the coming months as mortgage rates rise. The February results do not reflect the already rising rates, as all the sales represent transactions signed in January before the rates start to increase. Earlier this month, Yun’s 30-year fixed-rate mortgage rates predicted that the 30-year fixed-rate mortgage would reach 3.5% by December, which is why we need more.
Amanda Fung is an editor at Yahoo Finance.
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