In February, sales of existing homes skyrocketed by 9.5%, reaching a total of 4.38 million units on a seasonally adjusted annualized basis. This increase caught many housing analysts off guard, as they were expecting a slight decrease in sales. While sales were down by 3.3% compared to the previous year, this jump marked the most significant monthly gain since February 2023. The regions that saw the most substantial increase in sales were the West, with a 19.4% surge, and the South, with a 16.4% rise. Surprisingly, sales in the Northeast remained unchanged during this period.
Lawrence Yun, the chief economist at the National Association of Realtors, attributed the rise in sales to additional housing supply meeting market demand. He noted that housing demand has been steadily increasing due to population and job growth. However, the timing of actual purchases will ultimately depend on prevailing mortgage rates and the availability of diverse inventory options.
The inventory of homes for sale at the end of February saw a 10.3% increase compared to the previous year, totaling 1.07 million units. Despite this rise, the supply remains low at a 2.9-month pace based on the current sales rate. The heightened demand for homes continued to drive up the median price, which saw a 5.7% increase from the previous year to $384,500. This marked the eighth consecutive month of annual price gains. Competition in the housing market remained fierce, with a notable 20% of homes selling above their list price.
Contrary to the overall surge in sales, first-time buyers did not see a significant increase in February. They accounted for just 26% of all buyers, a slight dip from the 28% seen in January. This percentage falls short of the historical average of approximately 40%. On the other hand, all-cash sales rose to 33%, up from 28% the previous year. Yun speculated that factors such as the stock market’s performance and record-high home prices may have influenced buyers’ decisions. Additionally, individuals from expensive states like California may be flocking to more affordable markets such as Florida or Georgia, where they are able to make all-cash purchases.
The surprising surge in existing home sales in February reflects a complex interplay of factors, from increased housing supply to shifting buyer preferences and market dynamics. While the rise in sales is encouraging, it will be essential to monitor how these trends evolve in the coming months amidst fluctuating mortgage rates and changing consumer behaviors.