US homes sales bounced back in February as homebuyers seized on easing mortgage rates

Sales of previously occupied U.S. homes bounced back in February as home shoppers took advantage of easing mortgage rates and a modest increase in properties on the market heading into the spring homebuying season.

Existing home sales rose 1.7% last month from January to a seasonally adjusted annual rate of 4.09 million units, the National Association of Realtors said Tuesday.

Sales fell 1.4% compared with February last year. The latest sales figure topped the 3.84 million pace economists were expecting, 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.

Home prices continued to rise last month, albeit more slowly. The national median sales price increased 0.3% in February from a year earlier to $398,000, an all-time high for any February on data going back to 1999, NAR said. Home prices have risen on an annual basis for 32 months in a row.

The latest sales trends follow a dismal January, when existing home sales posted their biggest monthly decline in nearly four years and the slowest annualized sales pace in more than two years, although NAR has since revised January’s sales data modestly higher.

The U.S. housing market has been in a slump dating back to 2022, when mortgage rates began to climb from pandemic-era lows.

Sales have been hovering close to a 4-million annual pace now going back to 2023. That’s well short of the 5.2-million annual pace that’s historically been the norm.

A sharp run-up in home prices, especially in the early years of this decade, and a chronic shortage of homes nationally worsened by years of below-average home construction have left many aspiring homeowners priced out of the market.

At the same time, mortgage rates have been trending lower, boosting the purchasing power for home shoppers who can afford to buy at current rates.

The average rate on a 30-year mortgage dropped two weeks ago to just under 6% for the first time since late 2022, according to mortgage buyer Freddie Mac.

However, the 10-year Treasury yield, which lenders use to price home loans, has climbed following the spike in oil prices since the Iran war started, which could mean higher mortgage rates just as the spring homebuying season gets going.

Affordability remains a challenge for many aspiring homeowners, especially first-time buyers who don’t have equity from an existing home to put toward a new home purchase. Uncertainty over the economy and job market are also keeping many would-be buyers on the sidelines.

In addition to more buyer-friendly mortgage rates, those who can afford to buy are benefiting from a wider selection of properties on the market.

There were 1.29 million unsold homes at the end of February, up 2.4% from January and up 4.9% from February last year, NAR said. That’s still well short of the roughly 2 million homes for sale that was typical before the COVID-19 pandemic.

February’s month-end inventory translates to a 3.8-month supply at the current sales pace. Traditionally, a 5- to 6-month supply is considered a balanced market between buyers and sellers.