Sales of Existing Homes Fall by 7.2% in February 2022

In February 2022, sales of existing homes fell to a seasonally adjusted annual rate (SAAR) of 6.02 million, per data from the National Association of Realtors (NAR) released on March 18, 2022. This was a decrease of 7.2% from January, and sales fell in all four U.S. regions. The inventory of unsold existing homes rose by 10,000 (1.2%) to 870,000, equal to 1.7 months of sales at the pace set in February. The median sales price for existing homes was up by 15.0% on a year-over-year (YOY) basis to $357,300.

The downbeat report on existing-home sales follows two mixed readings on the U.S. housing market released earlier this week. In February, housing starts were up sharply. However, in early March, home builders reported a deteriorating outlook for starts in the upcoming months, with rapidly rising costs of building materials being a significant factor.

Home Sales Also Down YOY

Existing-home sales represent completed transactions that include single-family homes, townhomes, condominiums, and co-ops. As noted above, this figure fell by 7.2% from January to February 2022, reaching a seasonally adjusted annual rate of 6.02 million in February. On a YOY basis, sales fell by 2.4% from 6.17 million in February 2021.

Lawrence Yun, the NAR's chief economist, commented: "Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases. Some who had previously qualified at a 3% mortgage rate are no longer able to buy at the 4% rate. 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."

Impact of First-Time and Second-Home Buyers

First-time buyers were responsible for 29% of sales in February, up from 27% in January and down from 31% in February 2021. In recent years, the annual share of first-time buyers has been 34%.

Individual investors and second-home buyers account for many cash sales. They purchased 19% of homes in February, down from 22% in January but up from 17% in February 2021. All-cash sales were 25% of transactions in February, down from 27% in January but up from 22% in February 2021.

Distressed sales, which include foreclosure sales and short sales (short sales involve properties whose value is below the amount due on the mortgage), were 1% of total sales. This was unchanged from both January 2022 and February 2021.

Houses Are Moving Even Faster

The amount of time that properties typically remained on the market was 18 days in February, down from 19 days in January and 20 days in February 2021. About 84% of the homes sold in February 2022 were on the market for less than a month, versus 79% in January.

Home Prices Continue Rapid Rise

Regarding the 15.0% YOY surge in median home prices, increases were observed in all four major regions. Also, prices now have increased on a YOY basis for 120 consecutive months, an all-time record.

Lawrence Yun observed that rising interest rates and escalating prices have prevented many consumers from making a purchase. Yun stated: "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."

Inventories Up Slightly From All-Time Low

Total housing inventory at the end of February 2022 equaled 870,000 units, up by 2.4% from an all-time low of 360,000 in January and down by 15.5% from 1.03 million in February 2021. Unsold inventory now represents 1.7 months of sales at the current pace, up from 1.6 months in January but down from 2.0 months in February 2021.

Regional Detail

Compared to January, each of the four major U.S. regions experienced a month-to-month drop in sales in February. The northeast was down by 11.5%, the midwest by 11.3%, the south by 5.1%, and the west by 4.7%.

On a YOY basis, three regions reported declines: the northeast by 12.7%, the midwest by 1.5%, and the west by 8.3%. The south saw an increase of 3.0%.

Median prices surged in all four regions YOY: by 7.1% in the northeast, by 7.5% in the midwest, by 18.1% in the south, and by 7.1% in the west. The median prices in these regions are now, respectively, $383,700, $248,900, $318,800, and $512,600.

Yun observed: "Employment is vital for housing demand. The Southern states are seeing faster job growth, and consequently, it's the only region to experience a sales gain from a year ago."