Existing home sales in February, and thus capturing contract signings in the November thru January time frame, totaled 5.48mm. That was below the estimate of 5.55mm, down from 5.69mm in January and the slowest pace of sales in 5 months. The problem remains predominantly on the supply side but we did see a pickup in the number of homes for sale which led to months’ supply at 3.8 vs 3.5 in January. That still though is well below the historical average of around 6 months. That dearth of inventory led to a 7.7% y/o/y rise in the median home price and which is a major factor in why first time buyers only totaled 32% of purchases, the same trend as has been seen over the past few years. The demand side remains pretty good as the number of days on the market that a house sits fell to 45 from 50 and down from 59 last year but investors made up a growing piece of that demand. Investors took 27% of sales, up from 23% in January, 21% in December and vs 25% the same month last year.
Bottom line, we still have a lack of homes for sale needed to satisfy demand but the demand side continues to be impacted by persistent 5%+ home price gains at the same time mortgage rates have ticked higher. The traffic is there but what buyers can afford is the issue and first time buyers are of course impacted more so than investors. The NAR said “Realtors are reporting stronger foot traffic from a year ago, but low supply in the affordable price range continues to be the pest that’s pushing up price growth and pressuring the budgets of prospective buyers,” he said. “Newly listed properties are being snatched up quickly so far this year and leaving behind minimal choices for buyers trying to reach the market.”
The persistent home price increases is also resulting in more renting notwithstanding the persistent rental price increases and the NAR thinks “rental demand will remain solid for the foreseeable future.”
As for the sharp rise in prices, much of it is mix as homes priced between $500-750K rose 15.5% y/o/y, homes priced between $750-1mm was up by 18.1% and those priced above $1mm grew by 13.2% y/o/y. Those homes priced below $250k fell by 2.2% and coincides with the historically modest pace of buying on the part of first time households in part because of stretched finances but also the lack of inventory. The market needs more newly built homes priced below $250 I’ll say for the millionth time.