Drazen / Adobestock
After two months of gains, existing-home sales declined by 6.6% in February. Yet, according to the National Association of Realtors (NAR), sales were still 9.1% higher than at this same time last year. What’s more, every sales region in the country posted year-over-year gains. According to Lawrence Yun, chief economist for NAR, “Despite the drop in home sales for February―which I would attribute to historically low inventory―the market is still outperforming pre-pandemic levels.” He warned that higher home prices and rising mortgage rates will affect home affordability, ultimately creating a slowdown in home sales growth. Yet, overall, Yun expects 2021’s existing-home sales to be ahead of 2020’s, what with the widening distribution of COVID-19 vaccines and a sense of normalcy returning to many areas of the country. “Many Americans have been saving money,” he stated, “and there’s a strong possibility that once the country fully reopens, those reserves will be unleashed on the economy.”
Home Prices up More Than 15%
For the 108th month in a row, the median existing-home price increased; prices in February were 15.8% higher than last year. Prices for all housing types climbed in every sales region of the country. The newly released “2021 Home Buyers and Sellers Generational Trends Report” by NAR highlighted one key effect of the increasing prices: Buyers are struggling to save enough money for a down payment. According to Yun, affordability is weakening. “Various stimulus packages are expected and they will indeed help, but an increase in inventory is the best way to address surging home costs.”
Mortgage Rates Rising
Though mortgage rates remain near historic lows, rates are starting to climb toward levels not seen since the start of the pandemic. For the week ending April 1, 2021, the 30-year fixed-rate mortgage averaged 3.18%. In comparison, a year ago the rate averaged 3.33%. According to Sam Khater, chief economist for Freddie Mac, potential buyers are starting to take notice of the rising rates. “In fact, homebuyer demand has gone from 25% above pre-COVID levels at the start of the year, when mortgage rates hit record lows, to 8% above pre-COVID levels today.”
Available Homes Selling Fast
The lack of inventory is not helping to improve potential buyers’ confidence in the housing market. At the end of February, total housing inventory was down 29.5% from a year earlier. At the current sales pace, unsold inventory would supply the market for just two months, up from the 1.9-month supply in January but down from the 3.1-month supply in February 2020. The average property remained available for sale for just 20 days, down from 21 and 36 days a month ago and a year ago, respectively. Of all the homes sold in February, 74% were available for less than one month.
Regional Breakdown
Northeast - Existing-home sales annual rate of 770,000; a decrease of 11.5% from January 2021, but an increase of 13.2% from February 2020. The median sales price increased 20.5% from February 2020.
Midwest - Existing-home sales annual rate of 1.31 million; a decrease of 14.4% from January 2021, but an increase of 2.3% from February 2020. The median sales price increased 14.2% from February 2020.
South - Existing-home sales annual rate of 2.77 million; a decrease of 6.1% from January 2021, but an increase of 9.9% from February 2020. The median sales price increased 13.6% from February 2020.
West - Existing-home sales annual rate of 1.37 million; an increase of 4.6% from January 2021 and 12.3% from February 2020. The median sales price increased 20.6% from February 2020.
