Sales of Previously Owned Homes Tumble to Six-Month Low as Mortgage Rates Rise

Sales of previously owned homes declined to a six-month low in February as homebuyers faced rising home prices and increasing mortgage rates.

Combined sales of single-family houses, townhomes, condominiums and cooperatively owned apartments fell 7.2% to 6.02 million at a seasonally adjusted and annualized pace from a month earlier, according to a National Association of Realtors report on Friday.

The median existing-home price rose to $357,300, up 15% from a year ago, according to the report. In the same period, the average U.S. rate for a 30-year fixed mortgage increased almost a percentage point, to 3.76% from 2.81%, according to Freddie Mac data.

“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.”

Measured as an annual average, the median U.S. home price gained a record 17% in 2021 from a year earlier, according to NAR data. Mortgage rates surged from record lows in early 2021 as the Federal Reserve tapered and ended a mortgage-bond buying program aimed at keeping credit flowing during the early years of the Covid-19 pandemic.

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

The total amount of inventory listed for sale at the end of February rose to 870,000 units from January’s all-time low of 850,000, according to NAR data. February’s supply of homes was down 17% from a year ago.

The shortage of homes for sale, coupled with the affordability challenge of higher mortgage rates and a meteoric rise in property prices, is keeping some people from becoming homeowners, Yun said.

"Housing affordability continues to be a major challenge," Yun said.

First-time buyers represented 29% of purchases in February, down from 31% a year earlier, he said.