Home Sales Jump in February as Buyers Take Advantage of Lower Rates

February saw a 1.7% increase in home sales nationwide as buyers responded to declining mortgage rates and slightly more available properties. Despite the monthly improvement, sales remain below last year's levels and well short of historical norms.

February brought encouraging news for the housing market as buyers responded to declining mortgage rates and a small uptick in available properties, driving up home sales as the spring buying season approached.

The National Association of Realtors reported Tuesday that sales of existing homes climbed 1.7% in February compared to January, reaching a seasonally adjusted annual rate of 4.09 million units.

While sales dropped 1.4% compared to the same month last year, with all regions except the South showing year-over-year declines, the February figure exceeded economists’ projections of 3.84 million units, according to FactSet.

“Good momentum, but nonetheless sales are still below one year ago,” Lawrence Yun, NAR’s chief economist, said during a conference call.

Housing prices maintained their upward trajectory last month, though at a more moderate pace. The nationwide median home price reached $398,000 in February, marking a 0.3% increase from the previous year and setting a new February record since data collection began in 1999. This extends the streak of annual price increases to 32 consecutive months.

February’s performance represents a recovery from January’s disappointing results, when existing home sales experienced their steepest monthly drop in nearly four years and hit their slowest annual pace in over two years, though NAR later revised January’s numbers slightly upward.

The housing sector has struggled since 2022, when borrowing costs started climbing from their pandemic-era lows. Last year, sales of existing homes remained at three-decade lows.

Since 2023, sales activity has consistently hovered near the 4-million annual rate, falling significantly short of the historical average of 5.2 million annually.

Rapid price appreciation, particularly in recent years, combined with a nationwide housing shortage worsened by years of insufficient construction, has pushed homeownership beyond reach for many potential buyers.

Meanwhile, decreasing mortgage rates have enhanced buying power for those who can afford current market conditions.

Two weeks ago, the average 30-year mortgage rate fell just below 6% for the first time since late 2022, according to mortgage buyer Freddie Mac.

First-time homebuyers particularly benefited from the rate decline last month, representing 34% of all February purchases and matching the highest percentage seen in five years, Yun noted.

However, the 10-year Treasury yield, which influences mortgage pricing, has increased following oil price spikes since the Iran conflict began, potentially pushing borrowing costs higher as spring buying season arrives.

“Despite mortgage rates falling below 6% briefly, international conflict has sent them higher in recent days,” Lisa Sturtevant, chief economist at Bright MLS, said in an email. “If the conflict with Iran is limited, the housing market could rebound quickly. However, a prolonged conflict could stall home sales activity this spring.”

Affordability continues challenging many prospective homeowners, particularly first-time buyers lacking existing home equity for new purchases. Economic uncertainty and signs of labor market weakness are also keeping potential buyers hesitant, economists note.

Those able to purchase are finding more options available, though inventory remains well below historical standards.

Unsold homes totaled 1.29 million at February’s end, representing a 2.4% increase from January and 4.9% growth from the previous February, NAR reported. This still falls far short of the approximately 2 million homes typically available before the COVID-19 pandemic.

February’s inventory equals a 3.8-month supply at current sales rates. A balanced market between buyers and sellers traditionally requires 5 to 6 months of supply.

“We really do need more inventory to show up,” Yun said, warning that insufficient spring inventory combined with increased buyer activity could drive prices higher.