Improving affordability and falling mortgage rates helped lift home purchases in February, with first-time buyers returning to the market in greater numbers.
By yourNEWS Media Newsroom
Sales of previously owned homes in the United States increased in February as improved affordability and lower mortgage rates helped bring more buyers back into the housing market, according to new data released by the National Association of Realtors.
Existing home sales rose 1.7 percent from January to a seasonally adjusted annual rate of 4.09 million units. The increase exceeded analysts’ expectations, which had projected sales closer to 3.88 million units for the month.
The rise in sales occurred as affordability conditions reached their strongest level in nearly four years, aided by declining mortgage rates and steady wage growth.
First-time buyers accounted for 34 percent of all purchases in February, up from 31 percent both in January and during the same month last year. The share of new entrants into the market matched the highest level recorded in the past five years, suggesting that buyers previously priced out of the housing market are beginning to return.
Single-family homes led the increase in activity. Sales in that category climbed 2.5 percent during the month, while condominium sales declined slightly.
Housing economists said the improved affordability environment has played a key role in the rebound. The National Association of Realtors’ Housing Affordability Index rose to 117.6 in February, its highest reading since March 2022.
Mortgage rates also contributed to the shift. Average borrowing costs fell to approximately 6.05 percent during the month, roughly one percentage point lower than rates recorded a year earlier.
At the same time, wage growth has been outpacing home price increases, helping improve the purchasing power of prospective buyers.
“Housing affordability is improving, and consumers are responding,” said Lawrence Yun, chief economist for the National Association of Realtors.
Despite the improvement, Yun said overall housing demand still appears weaker than economic fundamentals would normally support.
“Wage growth is now outpacing home price growth by almost four percentage points,” Yun said. “Mortgage rates are also measurably lower compared to a year ago.”
Home prices continued to rise but at a slower pace than in recent years. The median price for an existing home in February reached $398,000, representing a year-over-year increase of 0.3 percent. The gain marked the 32nd consecutive month in which home prices have risen compared with the same month a year earlier, though the increase was among the smallest recorded since the surge in housing demand during the pandemic.
Housing supply also showed signs of improvement. Inventory increased 4.9 percent compared with a year earlier, reaching 1.29 million available homes. That represents the largest number of homes available for sale in the month of February since 2020.
The current inventory level equates to about 3.8 months of supply at the present sales pace, still below the roughly six months generally considered a balanced housing market.
Economists say the combination of rising inventory, moderating price growth, and lower borrowing costs could help stabilize the housing market after several years of elevated prices and constrained supply.
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