Home Sales Rise in February With First-Time Buyers Responsible for 27% of Purchases

Realtors report that existing home sales rose 14%, breaking a 12-month streak of declines.

By Jim DuPlessis | March 21, 2023

Existing home sales rose 14.5% from January to February, breaking a 12-month streak of declines, and prices fell for the first time in nearly 11 years, the National Association of Realtors reported Tuesday.

Homes sold at a seasonally adjusted annual rate (SAAR) of 4.58 million in February, down 22.6% from February 2022. However the 14.5% gain from January was the largest month-to-month gain since July 2020.

The NAR’s monthly report showed all four regions had month-to-month gains, and all had losses from a year earlier.

“Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” NAR Chief Economist Lawrence Yun said. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”

Lawrence Yun

Total housing inventory at the end of February was 980,000 units, identical to January and up 15.3% from a year ago. Unsold inventory sits at a 2.6-month supply at the current sales pace, down 10.3% from January but up from 1.7 months in February 2022.

“Inventory levels are still at historic lows,” Yun said. “Consequently, multiple offers are returning on a good number of properties.”

The median existing-home price for all housing types in January was $363,000, a decline of 0.2% from February 2022 as prices climbed in the Midwest and South and fell in the Northeast and West. This ends a streak of 131 consecutive months of year-over-year increases — the longest on record.

Properties typically remained on the market for 34 days in February, up from 33 days in January and 18 days in February 2022. About 57% of homes sold in February were on the market for less than a month.

First-time buyers were responsible for 27% of sales in February, down from 31% in January and 29% in February 2022.

All-cash sales accounted for 28% of transactions in February, down from 29% in January but up from 25% in February 2022. Individual investors or second-home buyers, who make up many cash sales, purchased 18% of homes in February, up from 16% in January but down from 19% in February 2022.

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.60% as of March 16. That was down from 6.73% from the previous week but up from 4.16% one year ago.

Single-family home sales sold at a SAAR of 4.14 million in February, up 15.3% from January but down 21.4% from a year earlier. The median existing single-family home price was $367,500 in February, down 0.7% from February 2022.

The Mortgage Bankers Association estimated that new single-family home sales were running at a SAAR of 688,000 units in February, down 5.1% from January,

Joel Kan, the MBA’s deputy chief economist, said the drop “reversed a January gain when buyers had a brief respite from rising mortgage rates, combined with discounts and concessions from sellers.”

Kan said mortgage applications for new homes in February were 1.2% higher than a year earlier and up 4% from January without accounting for seasonal patterns.

Joel Kan

The uptick in new home purchase applications showed a seasonal pick up, and that segment of the market has continued to show healthier activity than the broader purchase market, which is still showing annual declines of over 30%. Buyers, however, have remained extremely sensitive to movements in mortgage rates and the broader economy. Mortgage rates picked up in February, which put a damper on housing activity.

The MBA’s Mortgage Finance Forecast, last updated March 20, estimated there will be $267 billion in purchase originations in the first quarter, down 30% from a year earlier. For the year, it said it expects purchase originations to fall 11% to $1.41 trillion. A month ago it expected a 10% drop for the year.