Existing Home Sales Tumble On ‘Double Whammy’ Of Soaring Prices, Rising Mortgage Rates

Existing home sales plunged a bigger than expected 7.2% MoM in February – the biggest MoM drop in existing home sales since May 2020…

Source: Bloomberg

Home sales remain lower YoY (-2.43%) for the seventh straight month, tumbling to a 6.02mm SAAR (after hitting the highest in a year in January). Notably, as the chart below shows, Existing home sales surge in January was an outlier compared to new- and pending-sales, so perhaps this is payback…

Source: Bloomberg

This is a six-month low for existing home sales… and it will likely get worse as these are deals that were likely set in December when mortgage rates were significantly lower…

The median existing-home price for all housing types in February was $357,300, up 15.0% from February 2021 ($310,600), as prices grew in each region.

This marks 120 consecutive months of year-over-year increases, the longest-running streak on record.

“Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases,” said Lawrence Yun, NAR’s chief economist.

“Some who had previously qualified at a 3% mortgage rate are no longer able to buy at the 4% rate.

Even the NAR is rubbishing the Government’s CPI data…

“Monthly payments have risen by 28% from one year ago – which interestingly is not a part of the consumer price index – and the market remains swift with multiple offers still being recorded on most properties.”

The most expensive homes are seeing the biggest increases in sales while lower-priced home-sales are crashing…

Yun is full of hope however, expecting prices to adjust (lower) to improve affordability…

“The sharp jump in mortgage rates and increasing inflation is taking a heavy toll on consumers’ savings,” he said. “However, I expect the pace of price appreciation to slow as demand cools and as supply improves somewhat due to more home construction.”

The slide in sales reflects a market still constrained by a lack of inventory. At the current pace it would take 1.7 months to sell all the homes on the market, close to a record low.

First-time buyers accounted for 29% of sales last month, down from 31% a year earlier.

Existing home sales fell in every geographical region with the Northeast worst:

Existing-home sales in the Northeast slipped 11.5% in February, registering an annual rate of 690,000, a 12.7% drop from February 2021. The median price in the Northeast was $383,700, up 7.1% from one year ago.

Existing-home sales in the Midwest sagged 11.3% from the prior month to an annual rate of 1,330,000 in February, a 1.5% decrease from February 2021. The median price in the Midwest was $248,900, a 7.5% climb from February 2021.

Existing-home sales in the South fell 5.1% in February from the prior month, posting an annual rate of 2,790,000, an increase of 3.0% from one year ago. The median price in the South was $318,800, an 18.1% jump from one year prior. For the sixth straight month, the South experienced the highest pace of price appreciation compared to the other regions.

Existing-home sales in the West slid 4.7% from the previous month, reporting an annual rate of 1,210,000 in February, down 8.3% from one year ago. The median price in the West was $512,600, up 7.1% from February 2021.

And NAR has a message for you…

“For the past couple of years, buyers have had to contend with a market of high demand, low inventory and a mix of uncertainties with COVID-19 protocols,” said NAR President Leslie Rouda Smith, a Realtor® from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas.

“Consumers are presently challenged with higher mortgage rates, so now, more than ever, interested buyers need the trusted expertise of Realtors® in order to navigate this current market.”

Don’t forget – Realtor’s Luxurious Lives Matter too?