A Closer Look at the Surging Trends in Existing Home Sales and Inventory

The real estate market in February witnessed a notable surge in existing home sales, defying earlier projections and marking a significant uptick in activity, as reported by The National Association of Realtors® (NAR). Pre-owned single-family houses, townhouses, condominiums, and cooperative apartments exhibited robust sales, reaching a seasonally adjusted annual rate of 4.38 million units. This marked a remarkable 9.5 percent increase from the previous month’s pace of 4.0 million units and represented the most substantial monthly rise since the corresponding period last year. Despite this impressive growth, sales still fell short of the peak seen in February of the previous year by 3.3 percent.

Analysts, who had anticipated a more modest increase, were surprised by the surge, with consensus estimates for sales standing at 3.92 million units, according to a poll by Econoday. Trading Economics had projected a slightly higher rate of 3.94 million units, further highlighting the unexpected strength in the market.

Breaking down the data, single-family home sales experienced a notable uptick, reaching a seasonally adjusted annual rate of 3.97 million units, reflecting a substantial 10.3 percent gain. However, on a year-over-year basis, single-family home sales were down by 2.7 percent. Meanwhile, sales of condos and coops saw a modest increase, rising to 410,000 units, marking a 2.5 percent gain from January, yet showing a decline of 8.9 percent compared to the previous year’s figures.

Despite the surge in sales, the inventory of homes available for purchase also saw an improvement, rising by 5.9 percent from the previous month and by 10.3 percent from the corresponding period last year, reaching a total of 1.07 million units. However, it’s worth noting that this still represents a relatively low 2.9-month supply at the current rate of sales, falling short of the five-to-six-month supply typically considered indicative of a balanced market.

The median existing home price for all housing types in February experienced a notable increase, reaching $384,500, marking a 5.7 percent rise from the previous year and setting a new record for the month of February. This upward trend was consistent across different property types, with the median price for single-family homes rising by 5.6 percent to $388,700, while condos appreciated by 6.7 percent to a median of $344,000.

First-time buyers accounted for 26 percent of the month’s sales, while individual investors or second-home buyers represented 21 percent of the market. Cash transactions continued to play a significant role, comprising 33 percent of total sales. Properties remained on the market for an average of 38 days in February, slightly longer than in the previous month but still indicating a relatively brisk pace of sales activity.

Regionally, sales saw an uptick in three out of four major regions compared to January, although they remained below the levels seen a year earlier across all regions. The Northeast saw a sales rate of 480,000 units for the fourth consecutive month, representing a 7.7 percent decline from the previous year, while experiencing a notable increase in median prices.

In the Midwest, existing home sales rose by 8.4 percent, reaching an annual rate of 1.03 million units, albeit still down by 3.7 percent compared to the previous year. The South witnessed a 9.8 percent increase in sales, reaching an annual rate of 2.02 million units, with median prices also on the rise.

The West experienced the most significant surge in sales, with a notable 16.4 percent increase compared to January, although sales were down slightly by 1.2 percent year-over-year. Prices in the West also saw a substantial rise, climbing by 9.1 percent.

Analyzing the data further, analysts from the National Association of Home Builders (NAHB) compared the results of NAR’s Pending Home Sales Index (PHSI) with recent completed transactions. The PHSI, a leading indicator of existing home sales, showed a decline from 78.1 to 74.3 in January, reflecting an 8.8 percent decrease compared to the previous year.

In conclusion, the surge in existing home sales in February defied earlier expectations, signaling a robust market despite ongoing challenges. With improvements in inventory levels and continued upward pressure on prices, the real estate landscape remains dynamic, presenting both opportunities and challenges for buyers and sellers alike.

Matthew Graham
Matthew Graham
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