US home sales surged last month, despite highest February prices on record

Sales of previously owned homes in the US unexpectedly soared in February to the highest level in a year, in a sign that buyers are returning to the market.

Meanwhile, mortgage rates edged higher this week, according to a separate report released Thursday from Freddie Mac.

Existing home sales — which make up most of the housing market and include single-family homes, townhomes, condominiums and co-ops — rose 9.5% in February from the prior month to a seasonally adjusted annualized rate of 4.38 million units, the National Association of Realtors reported Thursday. That was the second straight month of rising sales and the largest monthly increase since February 2023, according to a release.

Home sales have rebounded since dropping to the lowest levels in decades last fall as mortgage rates shot up.

Meanwhile, the median national price of an existing home rose 5.7% in February from a year earlier, to $384,500, a bigger annual rise than in the prior month. It was the highest median home price for any February on record.

“Additional housing supply is helping to satisfy market demand,” said Lawrence Yun, NAR’s chief economist, in a release. “Housing demand has been on a steady rise due to population and job growth, though the actual timing of purchases will be determined by prevailing mortgage rates and wider inventory choices.”

More homes on the market

A major driver for last month’s jump in sales was a sharp increase in the number of homes that came to market.

Total housing inventory rose 5.9% in February from the prior month, to 1.07 million units. From a year ago, inventory was up 10.3% last month, giving buyers more choice and easing the pressure of a historically tight market.

A rebound in inventory has long been overdue, Yun said in a conference call with reporters, as some Americans finally begin to give up their coveted low mortgage rates.

“What happened in the past two years when we had a historically low inventory level is that many people who would have moved in normal circumstances just delayed,” Yun said. “They said ‘I have my 3% mortgage rate, I don’t want to give it up,’ so many people simply delayed. But they can no longer delay.”

Homeowners who want or need to move for various reasons such as a marriage, divorce or new children are contending with the reality that mortgage rates are not likely to fall to the ultra-low levels that existed before the Federal Reserve began to raise interest rates in 2022, Yun said.

Mortgage rates rise after falling for two weeks

The 30-year fixed-rate mortgage averaged 6.87% in the week ending March 21, according to Freddie Mac. Mortgage rates ticked back up to levels seen a few weeks ago, after tumbling in the beginning of the month.

Mortgage rates track the benchmark 10-year Treasury yield, which slipped Wednesday after Federal Reserve officials reflected in their latest economic projections that they still expect three rates cuts this year. The Fed doesn’t directly set mortgage rates, but its action do influence them.

“Despite elevated rates, homebuilders are displaying renewed confidence in the housing market, focusing on the fact that there is a good amount of pent-up demand, an ongoing supply shortage and expectations that the Federal Reserve will cut rates later in the year,” Sam Khater, Freddie Mac’s chief economist, said in a release.

Rates are down from 7.79% in late October, the highest in two decades, but above anything seen from 2008 to 2022.

Economists don’t expect mortgage rates to fall below 6% this year.

This story has been updated with additional developments and context.

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