Existing Home Sales Drop as Prices Shoot Higher

Looking to move? Good luck, unless you’re willing to pay up. The cold weather last month didn’t help.

U.S. home sales fell more than expected in February, and a rebound could be muted by rising mortgage rates as well as higher house prices amid tight supply.

The National Association of Realtors said on Monday that existing home sales dropped 6.6% to a seasonally adjusted annual rate of 6.22 million units last month.

Economists polled by Reuters had forecast sales would drop 3.0% to a rate of 6.50 million units in February. Home resales, which account for the bulk of U.S. home sales, increased 9.1% on a year-on-year basis. Last month, sales declined in the Northeast, South and the Midwest, but rose in the West.

The housing market is seen lagging after being one of the main drivers of the economic recovery as Americans sought bigger and more expensive houses for home offices and remote schooling during the pandemic.

Home resales have been running ahead of contracts. The 30-year fixed-rate mortgage has risen to a nine-month high of 3.09%, according to data from mortgage finance agency Freddie Mac. Though mortgage rates remain historically low, the sustained increase since February is contributing to making homeownership more expensive for first-time buyers.

Mortgage rates have risen in tandem with U.S. Treasury yields, which have spiked in anticipation of stronger economic growth this year and higher inflation.

The median existing house price jumped 15.8% from a year ago to $313,000 in February. Prices are being squeezed higher by an acute shortage of homes available for sale. There were 1.03 million previously owned homes on the market in February, a record 29.5% decline from one year ago.

Builders are being constrained by record lumber prices as well as shortages of land and labor. At February’s sales pace, it would take two months to exhaust the current inventory, an all-time low and down from 3.1 months a year ago.

 

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