According to the National Association of Realtors (NAR), previously owned home sales increased by 4.2% in February, reaching an annualized rate of 4.26 million units on a seasonally adjusted basis. This uptick was above the anticipated decline of 3% predicted by analysts.

Year-Over-Year Comparisons

Despite the month-over-month growth, sales were still down 1.2% compared to February of the previous year. The reported figures reflect contracts that were finalized during December and January when mortgage rates were peaking at around 7% for 30-year fixed loans, though they have since receded to the high 6% range.

Market Conditions and Buyer Trends

Lawrence Yun, NAR’s chief economist, noted that increasingly available inventory is gradually enticing homebuyers back into the market. “Mortgage rates have not changed much, but more inventory and choices are releasing pent-up housing demand,” Yun stated in a press release.

Analyzing the sales data further reveals that increases were primarily concentrated in the luxury market, specifically homes priced over $750,000, while sales around the median price point dropped by 3% year-on-year.

Inventory and Supply Dynamics

At the close of February, housing inventory amounted to 1.24 million units, marking a 17% increase from the prior year. However, this inventory represents only a 3.5-month supply at the current sales pace, far below the balanced rate of six months that often indicates a stable market.

“We are still in a relatively tight market condition,” Yun remarked, indicating that limited supply continues to place upward pressure on home prices, which have reached record highs.

Pricing Trends

The median home price in February hit $398,400, reflecting a 3.8% increase compared to the previous year, underscoring the trend of escalating prices across all regions in the country during this period.

Buyer Demographics

Interestingly, first-time buyers represented a growing segment of the market, accounting for 31% of sales in February, up from 26% a year earlier. In contrast, investor activity has seen a decline, as they made up only 16% of sales compared to 21% in the prior year. Cash transactions remained stable at 32%, slightly down from last year, indicating a shift where more first-time buyers are opting to purchase without financing.

Future Market Outlook

While the February sales figures exceed expectations, they reflect market conditions from two months prior. A recent survey by John Burns Research and Consulting revealed that many real estate agents perceive this spring’s resale market as softer than usual. Over half of the respondents noted weaker sales conditions, raising concerns about affordability and economic uncertainty keeping potential buyers on the sidelines.

“Current sales ratings remain weak, with 53% of agents reporting weaker than normal sales. This is better than 56% one year ago but lower than January’s 47%,” the report stated, emphasizing the ongoing challenges in the housing market.