Image: WrightStudio - Adobestock
After declining slightly in January, existing-home sales rebounded in February, according to the National Association of Realtors (NAR). Except for the Northeast, all regions in the country reported sales gains; increases were particularly high in the West. Over five million homes were sold across the country, marking the strongest February market since 2007. According to Lawrence Yun, chief economist for the NAR, it should be attributed to "the incredibly low mortgage rates and the steady release of a sizeable pent-up housing demand that was built over the years."
Pandemic Takes Its Toll
While sales were on the upswing, that growth is not expected to continue due to the current coronavirus and social quarantines; the economy and the stock market have taken a significant hit due to the pandemic. According to Yun, the sales figures "show that housing was on a positive trajectory, but the coronavirus has undoubtedly slowed buyer traffic, and it is difficult to predict what short-term effects the pandemic will have on future sales."
Low Inventory and Fast Sales
By the end of February, there were only 1.47 million homes available for sale; this was up 5% from a month ago but down 9.8% from a year ago. At the current sales pace, all unsold inventory would supply the market for only 3.1 months, unchanged from January but less than the 3.6-month supply recorded in February 2019. The average time a property remained on the market was 36 days. In comparison, properties remained available for sale for 43 days a month ago and 44 days a year ago. Of all the homes on the market in February, 47% sold in under a month.
More People Were House Hunting
According to NAR, the past couple of months have seen more people entering the market. These buyers may be in it for the long haul. "Once the social distancing and quarantine measures are relaxed," says Yun, "we should see this temporary pause evaporate and will have potential buyers return with the same enthusiasm." First-time buyers still see positives in the housing market, since this group accounted for 32% of all purchases in February, unchanged from both a month ago and a year ago. All-cash sales, meanwhile, made up 20% of all transactions. Individual investors and second-home buyers, who often make all-cash offers, accounted for 17% of all home purchases in February.
Housing Is a Good Investment
For the 96th month in a row, home prices climbed; in February, the median existing-home price rose 8% from a year earlier. Every region in the country saw price increases. The trend is expected to continue, even with the current pandemic. According to Yun, "Unlike the stock market, home prices are not expected to drop because of the on-going housing shortage and due to homes getting delisted during this time of crisis."
Regional Sales Breakdown
In February, existing-home sales climbed in the Midwest, South, and West, and year-over-year sales increased in all four regions. Median home prices saw year-over-year gains, with the Northeast and South recording the strongest price growth.
Northeast: Existing-home sales annual rate of 700,000; a decrease of 4.1% from January 2020 but an increase of 2.9% from February 2019. The median sales price increased 8.2% from February 2019.
Midwest: Existing-home sales annual rate of 1.29 million; an increase of 0.8% from January 2020 and 4% from February 2019. The median sales price increased 7.9% from February 2019.
South: Existing-home sales annual rate of 2.52 million; an increase of 7.2% from January 2020 and 8.2% from February 2019. The median sales price increased 8.2% from February 2019.
West: Existing-home sales annual rate of 1.26 million; an increase of 18.9% from January 2020 and 11.5% from February 2019. The median sales price increased 8.1% from February 2019.
