Home Sales Spike in February on a Dip in Mortgage Rates, Though Prices Fall for First Time in 11 Years

Sales of existing homes soared by 14.5% in February, although the median price of a home fell for the first time in nearly 11 years, the National Association of Realtors said on Tuesday.

Although it was the largest monthly increase since July, 2020, sales are still off by nearly 23% from a year ago.

The median price, meanwhile, fell 0.2% from 2021 to $363,000.

“Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” said NAR Chief Economist Lawrence Yun. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”

Inventory of homes for sale remains low, with less than a three-month supply as homeowners sit on low-rate mortgages that dampen their enthusiasm to put their homes on the market. But, any drop in mortgage rates brings more buyers out into the market.

“As high prices and elevated mortgage rates continue to stifle buyer activity, this spring’s market is expected to be toned down relative to the last couple of years,” Realtor.com economic data analyst Hannah Jones said ahead of the release. “However, the housing market remains undersupplied, so well-priced, well-maintained listings are likely to draw buyer attention.”

There are two unknowns facing the spring market. One is what the Federal Reserve will do with interest rates when it concludes its two-day meeting on Wednesday. The Fed has been aggressively raising interest rates, in turn driving mortgage rates higher, but may well pause or stop on account of the turmoil in the banking industry.

And there are some small signs that the robust job market could be entering a period of slowdown. If consumers worry about the safety of the banking system and their jobs, that would slow purchases of big-ticket items, such as houses.

“The recent bank failures are likely to weigh on home sales in coming months despite the recent decline in mortgage rates,” said Ruben Gonzalez, chief economist, Keller Williams. “In the past, banking crises have often corresponded with protracted housing market downturns and declining home prices. They have also precipitated, or resulted from, severe recessions. We suspect these failures will worsen an ongoing recession in the housing market.