Business
Why did US existing home sales unexpectedly rise as mortgage rates fell?
US existing home sales rose in February as lower mortgage rates and moderating price growth helped bring buyers back, though limited housing supply could restrict activity during the spring selling season.
US existing home sales unexpectedly increased in February as lower mortgage rates and slower house-price growth encouraged buyers to re-enter the market. Data from the National Association of Realtors showed affordability improving and first-time buyer participation rising, though limited housing supply could constrain activity during the crucial spring home-buying season.
Key highlights
- US existing home sales rose 1.7% in February to a 4.09 million annualised pace
- Economists had forecast a decline to 3.89 million units
- Mortgage rates around 6% helped improve affordability
- Median home price rose 0.3% YoY to $398,000
- First-time buyers accounted for 34% of total purchases
US existing home sales rose 1.7% in February to a seasonally adjusted annual rate of 4.09 million units, according to the National Association of Realtors.
January’s figure was revised higher to 4.02 million units from the previously reported 3.91 million units.
Economists polled by Reuters had expected home resales to decline to 3.89 million units, making February’s increase an unexpected upside surprise.
Regional trends show uneven housing activity
Housing activity varied significantly across regions.
- West: Sales surged 8.2%
- South: Increased 1.6%
- Midwest: Rose 1.1%
- Northeast: Fell 6%, partly due to severe winter weather
Despite the monthly increase, overall existing home sales were still 1.4% lower compared with the same period last year.
Home prices continue to climb
The median home price rose 0.3% year-on-year to $398,000, reflecting continued pressure from limited housing supply.
High prices remain one of the main barriers for buyers despite the modest improvement in sales.
Lower mortgage rates offer modest relief
The improvement in sales suggests declining mortgage rates are starting to support housing demand, though affordability challenges persist.
Housing affordability has also become a major political issue ahead of the upcoming US midterm elections, as elevated home prices and borrowing costs continue to strain potential buyers.
Economists warn recovery remains fragile
Charlie Dougherty, senior economist at Wells Fargo, said affordability remains a key constraint.
“Affordability, though improved around the edges, remains a significant limitation,” he told Reuters.
“Homebuying is likely to slowly improve over the course of the year, but activity will probably remain sluggish due to challenging affordability conditions.”
Heather Long, chief economist at Navy Federal Credit Union, said the US still faces a shortage of affordable homes.
"Homes are still pricey, and many Americans are struggling with an affordability crunch. The United States needs to build more starter homes.”
Meanwhile, Lawrence Yun, chief economist at the National Association of Realtors, noted that distressed home sales remain low because many homeowners still hold substantial housing equity.
Housing supply improves but remains tight
Housing inventory increased modestly but remains below historical levels.
The number of existing homes on the market rose 2.4% to 1.29 million units, still below pre-pandemic levels of roughly 1.5–1.6 million homes.
At February’s sales pace, it would take about 3.8 months to exhaust the current supply, slightly higher than 3.6 months a year earlier.
Most transactions occurred in the $250,000–$500,000 price range, which accounted for 45.5% of homes sold.
Mortgage trends shaping housing demand
Mortgage rates have eased this year, helping improve affordability.
The average 30-year fixed mortgage rate stood near 6% last week, according to Freddie Mac, after briefly dipping below that level earlier in the year.
However, rising geopolitical tensions and higher US Treasury yields could push borrowing costs higher again.
Housing activity typically accelerates during the spring selling season, the busiest period for US home purchases.
However, economists warn that limited housing supply and elevated home prices could keep the recovery slow unless more homes enter the market.
FAQs
Q1. Why did US existing home sales rise in February?
Lower mortgage rates improved affordability slightly, encouraging more buyers to return to the housing market.
Q2. How many existing homes were sold in February?
Sales rose to a seasonally adjusted annual rate of 4.09 million units, exceeding economists’ expectations.
Q3. Are mortgage rates declining in the US?
Yes. The average 30-year fixed mortgage rate has eased to around 6%, providing modest relief for buyers.
Q4. Is the US housing market recovering?
There are early signs of improvement, but tight supply and high home prices mean the recovery is expected to remain gradual.
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