By Lisa Sturtevant, PhD
Chief Economist, Bright MLS
The National Association of REALTORS® reported that existing home sales totaled 4.38 million on an annualized basis in February, up 9.5% from January. February sales tracked 3.3% below last year.
The uptick in sales activity between January and February is a good sign, but there is some uncertainfty in the housing market as we head into spring. The Federal Reserve likely will put off rate cuts until the summer and is now talking about three rate cuts in 2024 rather than five or six. All that suggests that mortgage rates will not come down much in the first half of the year. Buyers and sellers seem to be adjusting to the “new normal” of mortgage rates above 6.5%. However, as home prices continue to rise, affordability is a growing challenge.
The U.S. median home sale price increased by 5.7% in February, the eighth month in a row of year-over-year price gains and the biggest price jump since October 2022. Prices are now more than 40% higher than they were before the pandemic. And with interest rates nearly double what they were then, the typical monthly payment for a homebuyer has increased by nearly 90%.
More inventory would be a boon to the market this spring, and there are some signs that supply is loosening up. Builders are on track to deliver significant numbers of new homes this year. And weekly new listing data shows that the inventory of existing homes has been slowly growing—even with mortgage rates elevated. The primary reason homeowners are listing their homes for sale? Family. Changes like marriage, divorce, the birth of a child, or caring for an aging parent will trump mortgage rates for some homeowners who will give up their pandemic-era mortgage rate.
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