What's driving this unexpected shift?
Existing-home sales climbed 4.2% in February, reaching a seasonally adjusted annual rate of 4.26 million, according to the National Association of Realtors (NAR). However, sales were down 1.2% compared to February 2024.
NAR chief economist Lawrence Yun attributed the monthly increase to more inventory and choices for buyers. “Home buyers are slowly entering the market,” Yun said. “Mortgage rates have not changed much, but more inventory and choices are releasing pent-up housing demand.”
The inventory of unsold homes rose 5.1% from January, reaching 1.24 million units, a 17% increase from one year ago. This represents a 3.5-month supply at the current sales pace, the same as in January but up from 3.0 months in February 2024.
The median existing-home price across all housing types was $398,400 in February, marking a 3.8% increase from a year earlier. This was the 20th consecutive month of year-over-year price gains, with all four US regions experiencing price appreciation.
First-time buyers enter the market
First-time buyers accounted for 31% of February’s purchases, up from 28% in January and 26% a year ago. Holden Lewis, a home and mortgage expert at NerdWallet, highlighted the significance of this increase: “It appears that first-time buyers stopped waiting for mortgage rates to fall. Many of them no doubt hope to refinance someday when mortgage rates decline.”
Cash sales made up 32% of transactions in February, rising from 29% in January but slightly lower than the 33% recorded a year earlier. Individual investors and second-home buyers, who are often cash buyers, accounted for 16% of sales, down from 17% in January and 21% in February 2024. Distressed sales, including foreclosures and short sales, remained at 3% of total transactions.
Regional performance
Sales trends varied across regions. The West saw the largest gain, with existing-home sales jumping 13.3% from January, matching last year’s level. The South experienced a 4.4% increase but remained 4.0% below its February 2024 sales pace. The Northeast recorded a 2.0% decline month-over-month but posted a 4.2% year-over-year increase. Meanwhile, the Midwest remained stable from January and edged up 1.0% from a year ago.
Mortgage rates and market outlook
According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.65% as of March 13, slightly up from 6.63% the prior week but lower than 6.74% a year ago.
Lewis noted the challenge of affordability amid rising prices and high mortgage rates. “Home prices have risen 47% in five years, and mortgage rates were elevated last month,” he said. “Even so, lots of first-time buyers managed to make successful offers.”
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