Home sales rise 4.2% in February as buyers slowly return to market

Existing-home sales increased 4.2% in February to a seasonally adjusted annual rate of 4.26 million homes, according to data released by the National Association of Realtors. Despite the monthly gain, sales remained 1.2% below levels from a year ago.

The median price for existing homes climbed to $398,400, marking a 3.8% increase from February 2024 and continuing a 20-month streak of year-over-year price growth.

"Home buyers are slowly entering the market," said NAR Chief Economist Lawrence Yun. "Mortgage rates have not changed much, but more inventory and choices are releasing pent-up housing demand."

Housing inventory expanded to 1.24 million units at the end of February, up 5.1% from January and 17% higher than one year ago. This represents a 3.5-month supply at the current sales pace, unchanged from January but higher than the 3.0-month supply recorded in February 2024.

Yun noted that raw sales figures were affected by calendar differences. "On a technical note, raw sales in February were down 5.2% from last year, which was a leap year with one extra day of business," he said. "However, after adjusting for this effect, combined with the winter seasonal factors, the momentum for home sales is flashing encouraging signs."

The economist also highlighted the wealth impact of rising home values. "Each one percentage point gain in home price translates into an approximately $350 billion increase in housing equity for American property owners," Yun said. "That means a gain of nearly $1.3 trillion in home value appreciation at a time when the current stock market is undergoing a correction. Moreover, the ongoing housing shortage, coupled with historically low mortgage default rates, implies a solid foundation for home values."

First-time buyers accounted for 31% of February sales, up from 28% in January and 26% a year ago. This represents a notable improvement from the historic low of 24% for the annual share of first-time buyers reported in NAR's 2024 Profile of Home Buyers and Sellers released last November.

Cash transactions made up 32% of February sales, increasing from 29% in January but down from 33% in February 2024. Individual investors and second-home buyers, who often make cash purchases, represented 16% of the market, down from 17% in January and 21% a year ago.

Properties typically remained on the market for 42 days in February, slightly longer than the 41 days in January and 38 days in February 2024.

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.65% as of March 13, slightly up from 6.63% the previous week but down from 6.74% a year ago.

Single-family home sales increased 5.7% to a seasonally adjusted annual rate of 3.89 million in February, though this was 0.3% below the previous year's level. The median price for single-family homes reached $402,500, up 3.7% from February 2024.

In contrast, sales of existing condominiums and co-ops declined 9.8% to a seasonally adjusted annual rate of 370,000 units, also down 9.8% from a year ago. The median existing condo price rose to $355,100, representing a 3.5% increase from the prior year.