Existing home sales fell in february

Summary

Existing home sales fell 7.2% in February to a 6.02 million-unit pace. While it is tempting to blame rising mortgage rates for February's larger-than-expected drop, the decline continues a recent pattern with annualized sales bouncing around from month-to-month. Mortgage rates have been rising since last fall, and concern about rising interest rates picked up after the FOMC signaled it would accelerate plans to normalize interest rates and begin to reverse the expansion of the Fed's balance sheet. Those concerns likely caused some buyers to accelerate their timetable for purchasing a home, which is a point we raised with January's surprisingly strong rise in home sales, so sales were poised for a drop. Pending home sales, which reflect purchase contracts for existing homes, fell sharply in November, December and January, dropping 2.9%, 2.3% and 5.7%, respectively. Unusually lean inventories are also likely restraining sales. While the inventory of homes available for sale rose 2.4% in February, they are down 15.5% over the past year and remain near an all-time low.

With inventories low, homes are selling unusually quickly and often have multiple bids above their asking price. The median price of an existing home has risen 15% over the past year to $357,300. Prices are up the most in the South, which has seen a huge influx of buyers from the Northeast and West Coast, many of which have sold homes at higher prices and bring considerable purchasing power to the region. The share of homes sold in the South priced between $500,000 and $1 million have surged by more than 40% over the past year, which is well ahead of any other region.

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