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Home Sales Post Largest Monthly Gain in a Year as Supply Grows
March 19, 2024
The spring homebuying season got off to an early start this year, as sales unexpectedly spiked in February amid a rising inventory of homes for sale on the market.
Sales of pre-existing homes, which account for the bulk of the housing market, jumped 9.5% in February from the month prior for a seasonally adjusted annualized total of 4.38 million units, according to the National Association of Realtors (NAR). Industry analysts had expected a slight downturn in the month’s sales numbers. Sales gains were biggest in the west and south, jumping 19.4% and 16.4%, respectively.
NAR’s chief economist attributed the month’s gains to “additional housing supply […] helping satisfy market demands. Inventory was up 10.3% year-over-year for a total of 1.07 million homes on the market at the end of February. Despite the increase, existing inventory amounts to just a 2.9-month supply. Generally, a 6-month supply is considered to represent an equilibrium between buyers and sellers.
Even with the month’s surge in sales, on an annual basis, sales were down 3.3%, and the constrained supply and high mortgage rates have left many prospective buyers feeling priced out of the market.
The lack of available inventory led to stiff competition as 20% of homes sold above the list price. The median price of an existing home sold in February climbed 5.7% from a year earlier to $384,500. That marks the eighth consecutive month of annual price gains.
The month’s figures are based on sales that closed in February, so the contracts were likely signed in December and January when the average rate for a 30-year fixed mortgage was in the mid-6% range. It has since risen above 7%, further hindering affordability.
First-time homebuyers are struggling to keep up with the market. First-time buyers represented just 26% of buyers in February, down from 28% in January and well below the historical norm of 40%.
With mortgage rates so high, more buyers are bypassing mortgages entirely. The percentage of all-cash sales climbed to 33%, up from 28% a year earlier.
