After increasing to the highest annual rate in six months, existing-home sales in the U.S. tumbled in February amidst unshakably low supply levels and steadfast price growth in several sections of the country, according to the latest report from the National Association of Realtors (NAR).
Led by the Northeast and Midwest, all four major regions of the country experienced declines in home sales in February.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 7.1 percent to a seasonally adjusted annual rate of 5.08 million in February from 5.47 million in January. Despite last month's large decline, sales are still 2.2 percent higher than they were this time last year.
Lawrence Yun, NAR chief economist, says existing sales disappointed in February and failed to keep pace with what had been a strong start to the year. "Sales took a considerable step back in most of the country last month, and especially in the Northeast and Midwest," he said. "The lull in contract signings in January from the large East Coast blizzard, along with the slump in the stock market, may have played a role in February's lack of closings. However, the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers."
According to Yun, job growth continues to hum along at a robust pace, but there appears to be some uneasiness among households that the economy is losing some steam. This was evident in NAR's latest quarterly HOME survey, which revealed that fewer respondents believe the economy is improving, and a smaller share of renters said that now is a good time to buy a home.
"The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers," said Yun.
The median existing-home price for all housing types in February was $210,800, which NAR says is up 4.4 percent from February 2015 ($201,900). February's price increase marks the 48th consecutive month of year-over-year gains.
NAR reports that total housing inventory at the end of February increased by 3.3 percent to 1.88 million existing homes available for sale, but is still 1.1 percent lower than a year ago (1.90 million). Unsold inventory is at a 4.4-month supply at the current sales pace, up from 4.0 months in January.
The share of first-time buyers fell to 30 percent in February (matching the lowest share since November 2015) from 32 percent in January, but is up from 29 percent a year ago. NAR says that first-time buyers in all of 2015 represented an average of 30 percent.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage declined from 3.87 percent in January to 3.66 percent in February, which is the lowest rate since April 2015. The average commitment rate for all of 2015 was 3.85 percent.