As rising mortgage rates and home prices continued to price out homebuyers and reduce affordability, existing home sales dropped to a six-month low in February, according to the National Association of Realtors (NAR). Furthermore, home price appreciation is expected to slow in the coming quarters as demand cools and supply improves.
Total existing home sales, including single-family homes, townhomes, condominiums and co-ops, fell 7.2% to a seasonally adjusted annual rate of 6.02 million in February, the lowest level since August 2021. On a year-over-year basis, sales were 2.4% lower than a year ago.
The first-time buyer share rose to 29% in February, up from 27% in January and down from 31% a year ago. The February inventory level increased from 0.85 to 0.87 million units but was still down from 1.03 million units a year ago.
At the current sales rate, February unsold inventory sits at a 1.7-month supply, up from an all-time low of 1.6-month last month but down from 2.0-month a year ago. This low supply of resale homes is ongoing good news for home construction.
Homes stayed on the market for an average of just 18 days in February, down from 19 days in January and 20 days a year ago. In February, 84% of homes sold were on the market for less than a month.
The February all-cash sales share was 25% of transactions, down from 27% last month and up from 22% a year ago.
Tight supply continues to push up home prices. The February median sales price of all existing homes was $357,300, up 15.0% from a year ago, representing the 120th consecutive month of year-over-year increases, the longest-running streak on record. The median existing condominium/co-op price of $305,400 in February was up 10.9% from a year ago.
Geographically, all four regions saw a decline in existing home sales in February, ranging from 4.7% in the West to 11.5% in the Northeast. On a year-over-year basis, sales in the Northeast, Midwest and West declined 12.7%, 1.5% and 8.3%, while sales in the South grew 3.0%.
Meanwhile, the Pending Home Sales Index (PHSI) is a forward-looking indicator based on signed contracts. The PHSI decreased 5.7% from 116.1 to 109.5 in January. On a year-over-year basis, sales were 9.5% lower than a year ago per the NAR data.