Used home sales fell in February as rising mortgage interest rates and a shortage of homes for sale made it tough for buyers to compete.
Sales of existing homes fell 7.2% in February from the previous month to a seasonally adjusted annual rate of 6.02 million, the National Association of Realtors said Friday. February sales fell 2.4% from a year earlier.
The demand for home purchases far exceeds the number of homes available for sale. Buyers are eager to buy homes in case mortgage interest rates rise further. Potential sellers are hesitant to become buyers in such a frenetic market and choose not to list their homes, which keeps the inventory of homes on the market at an all-time high.
Some buyers are pulling out of the market, discouraged by widespread bidding wars and rising home prices. Many homes are still getting multiple offers and selling quickly above list price.
The median price of existing homes rose 15% in February from a year earlier, according to NAR, to $357,300.
“Not only is the mortgage rate going up, which now puts more stress on people’s budget limits, but the lack of inventory is permanent,” said Lawrence Yun, chief economist of NAR. “As a buyer, it is always difficult to enter the market.”
Economists polled by The Wall Street Journal had expected a 5.7% monthly decline in sales of existing homes, which make up the bulk of the housing market.
The combination of rapidly rising home prices and higher mortgage interest rates is making home ownership less affordable, especially for first-time buyers, who must make larger down payments as home prices rise. increase.
The typical monthly mortgage payment in February was up 28 percent from a year earlier, Yun said.
The average rate for a 30-year fixed-rate mortgage was 4.16% on Thursday, down from 3.09% a year earlier, according to Freddie Mac. The Federal Reserve on Wednesday moved to raise its benchmark federal funds rate for the first time since 2018, which is expected to push mortgage rates higher.
The market share of first-time buyers fell to 29% in February, from 31% a year earlier.
To participate in bidding wars, some buyers offer to buy homes without any repairs or to pay above the appraised value of a home if the appraisal is lower than the asking price. Others offer freebies to sellers, including concert tickets and free vacations, to make their offers stand out.
“The inventory shortage is really crushing the first-time home buyer,” said Las Vegas realtor Nora Aguirre. “But you have to keep moving because the alternative is for you to rent, which is also a hugely competitive market.”
Skylar Barsanti, 29, started house hunting earlier this year in Boise, Idaho.
“We watched everything and everywhere,” she said. “Finding anything under $400,000 in this area is insane.”
She bought a two-bedroom house in February for $385,000. “I was very lucky,” she said. “I entered before interest rates rose.”
There were 870,000 homes for sale at the end of February, up 2.4% from January and down 15.5% from February 2021, NAR said. At the current rate of sales, there was a 1.7 month supply of homes on the market at the end of February.
“The demand is the same as last year, but it seems like more, because there are fewer homes,” said Risa Corson, a real estate agent in Closter, NJ. “They don’t really have a choice. It’s either you buy this house or you wait for another one to come along.
A large number of cash buyers are pushing buyers using mortgages out of the market, she said.
About 25% of existing home sales in February were purchased with cash, up from 22% a year earlier, NAR said.
The typical home sold in February was on the market for 18 days, down from 19 days the previous month, NAR said.
““There is no leverage as a buyer. You have to beg them to accept your offer.”
“There’s no leverage as a buyer. You have to beg them to take your offer,” said Justin Lopatin, senior vice president of mortgages at the guaranteed-rate lender.
Existing home sales fell the most month over month in the Northeast, down 11.5%, and in the Midwest, down 11.3%.
Construction activity increased on strong demand, but builders were slowed by supply chain issues and labor shortages. Housing starts, a measure of U.S. home building, rose 6.8% in February from January, the Commerce Department said this week. Residential permits, which can be an indicator for future home construction, fell 1.9%.
owner of Journal, also operates Realtor.com under license from NAR.
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