In a positive development for the housing market, sales of existing homes surged last month by the largest margin in a year, attributed to an improved housing supply and stable mortgage rates. According to the National Association of Realtors (NAR), existing home sales rose by 9.5 percent in February compared to January, reaching an annual rate of 4.38 million on a seasonally adjusted basis.
Lawrence Yun, the chief economist at NAR, noted that the increase in housing supply has been instrumental in meeting the demand in the market, resulting in the highest sales rate since February 2023. The previous sluggishness in sales was partly due to elevated mortgage rates over recent times, with rates climbing in the past two years as the Federal Reserve aimed to control demand and curb inflation.
However, there has been a slight cooling in mortgage rates, with the 30-year fixed-rate mortgage averaging 6.7 percent as of March 14, according to Freddie Mac. Yun emphasized that while mortgage rate adjustments are now more gradual, NAR will be closely monitoring any upticks.
A landmark deal announced recently by NAR has the potential to impact the cost associated with buying and selling homes. The settlement, involving a payment of $418 million in damages and the elimination of rules on commissions, could eliminate the standard six percent sales commission in the industry.
Despite the positive momentum in February, home sales were still 3.3 percent lower compared to the same period last year, signaling ongoing challenges such as low housing supply and high mortgage rates. Rubeela Farooqi, the chief US economist at High Frequency Economics, highlighted these obstacles but pointed out that a rise in construction activity and lowered borrowing costs due to potential interest rate cuts could improve sales.
While the median price of existing homes saw a 5.7 percent increase from the previous year, analysts remain cautious about the sustainability of the sales recovery, linking it to a rebound in mortgage applications that has yet to materialize. The NAR reported an increase in total housing inventory from January, indicating a positive trend in the market as it navigates through changing dynamics.