Following two months of gains, existing home sales, as reported by the National Association of Realtors (NAR), dropped to a six-month low in February, as tight inventory continues to strain sales and fuel home prices. Storm effects due to a Southern winter storm also had an effect.
Total existing home sales, including single-family homes, townhomes, condominiums and co-ops, fell 6.6% to a seasonally adjusted annual rate of 6.22 million in February, the lowest level since September 2020. On a year-over-year basis, sales were 9.1% higher than a year ago.
The first-time buyer share decreased to 31% in February, down from 33% in January and from 32% a year ago. However, price gains threaten this submarket in the future. The February inventory level remains at a record-low 1.03 million units and is down from 1.46 million units a year ago.
At the current sales rate, the February unsold inventory remained at a 2.0-month supply, slightly up from January’s 1.9 month but still down from 3.1-month a year ago. This low level supply of resale homes is good news for home construction.
Homes stayed on the market for an average of just 20 days in February, an all-time low, down from 21 days in January and 36 days a year ago. In February, 74% of homes sold were on the market for less than a month.
The February all-cash sales share was 22% of transactions, up from 19% last month and 20% a year ago.
Tight supply continues to push up home prices. The February median sales price of all existing homes was $313,000, up 15.8% from a year ago, representing the 108th consecutive month of year-over-year increases. The median existing condominium/co-op price of $280,500 in February was up 12.3% from a year ago.
Geographically, three regions saw a decline in existing home sales in February. Sales in the Northeast, Midwest and South fell 11.5%, 14.4% and 6.1% respectively from last month, while sales in the West rose 4.6%.On a year-over-year basis, sales still grew in all four regions, ranging from 2.3% in the Midwest to 13.2% in the Northeast.
Though existing home sales continue to outperform and housing demand is expected to remain strong due to low (although rising) mortgage rates and remote-work flexibilities, rising lumber prices and shortage of labor and land make housing supply struggle to meet the increased level of demand. The imbalance between housing supply and demand could hamper future sales by driving up house prices and eroding affordability.