Lower mortgage rates spurred buyers from the sidelines in February, propelling a spike in existing home sales, according to the National Association of Realtors (NAR).
The 14.5% increase during the month reversed 12 consecutive months of existing home sales declines. The jump was the largest on a monthly basis since July 2020 and brought the seasonally adjusted annual rate of sales to 4.58 million units. Outside of the COVID-19 era, it was the biggest bounce since December 2015.
On an annual basis, existing home sales are still down 22.6%, but February’s jump fueled notions that pent-up demand is merely waiting for a window of affordability to surge.
“Conscious of changing mortgage rates, homebuyers are taking advantage of any rate declines,” said Lawrence Yun, NAR’s chief economist. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”
February’s pace far exceeded expectations, with a Reuters poll forecasting a 5% gain to a pace of 4.20 million units. The swell was driven chiefly by a rebound in single-family sales, which grew 15.3% in February to a pace of 4.14 million units. Like total existing home sales, single-family sales had also slumped to 12 consecutive months of decreases prior to February.
Condo and co-op sales were up as well, increasing by 7.3% from January.
Gains were geographically broad-based, led by the West and South regions, which saw monthly existing home sales growth of 19.4% and 15.9%, respectively. The Midwest also saw double-digit monthly growth, up 13.5% from January, while the Northeast saw sales improve by 4%.
Notably, while the demand recovery helped home sales rally in February, price weakness persisted, with the median existing home price falling to $363,000. The yearly decline of 0.2% was slight, but it put a stop to the streak of 131 months of annualized existing home price increases, which was the longest ever recorded by NAR.