Existing home sales rebounded in February after two months of declines, according to the National Association of Realtors.

Total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 3% in February to a seasonally adjusted annual rate of 5.54 million in February, up from 5.38 million in January. After last month’s increase, sales are now 1.1% from a year ago. NAR noted that sizeable sales increases in the South and West offset declines in the Northeast and Midwest. 

NAR Chief Economist Lawrence Yun said sales were uneven across the country in February but did increase nicely overall.

“A big jump in existing sales in the South and West last month helped the housing market recover from a two-month sales slump,” he said. “The very healthy U.S. economy and labor market are creating a sizeable interest in buying a home in early 2018. However, even as seasonal inventory gains helped boost sales last month, home prices – especially in the West – shot up considerably. Affordability continues to be a pressing issue because new and existing housing supply is still severely subpar.”

“The unseasonably cold weather to start the year muted pending sales in the Northeast and Midwest in January and ultimately led to their sales retreat last month,” Yun added. “Looking ahead, several markets in the Northeast will likely see even more temporary disruptions from the large winter storms that have occurred in March.”

The median existing-home price for all housing types in February was $241,700, up 5.9% from February 2017’s $228,200. February’s price increase marks the 72nd straight month of year-over-year gains.

Total housing inventory at the end of February rose 4.6% to 1.59 million existing homes available for sale. This is still 8.1% lower than the previous year and has fallen year-over-year for 33 consecutive months. Unsold inventory is at a 3.4-month supply at the current sales pace, down .4 months from last year’s supply of 3.8 months.

NAR’s report noted that properties stayed on the market for 37 days in February, which is down from 41 days in January and 45 days a year ago and 46% of homes sold last month were on the market for less than a month.

First-time buyers were 29% of sales in February, which is unchanged from last month and down from 31% a year ago.

“Mortgage rates are at their highest level in nearly four years, at a time when home prices are still climbing at double the pace of wage growth,” said Yun. “Homes for sale are going under contract a week faster than a year ago, which is quite remarkable given weakening affordability conditions and extremely tight supply. To fully satisfy demand, most markets right now need a substantial increase in new listings.”

 Zillow Senior Economist Aaron Terrazas said that as the market enters spring home buying season, the news couldn’t come at a better time.

“The market needed this break from the past two months of disappointing existing home sales, and it couldn’t come at a better time as things begin to heat up for the spring home shopping season. Improvement in February existing home sales overall, despite wintry weather that likely forced many home shoppers to stay home last month, is an indicator of continued underlying strength and demand from buyers. Strong sales in the West – which was spared much of February’s wintry weather — drowned out weather-driven weakness in the Northeast. This demand looks sustainable, too, as a robust economy finally begins to meaningfully push up wages and make homeownership more achievable,” he said.

“Still, despite ongoing demand from buyers, there are a series of headwinds mounting in the existing sales market that look to be getting harder to overcome in the longer term. Inventory fell year-over-year yet again. It’s difficult to close a lot of sales when there are so few homes available to buy, and inventory of existing homes has been steadily declining for almost three years now. Coupled with rising mortgage interest rates that are at their highest since early 2014, this one-two punch has created a situation in which existing sales appear to be plateauing at around 5.5 million sales per year, well below the 6 million or more we might otherwise expect to see. To get to those levels, demand needs to stay hot, builders need to continue ramping up new home activity and more sellers need to feel comfortable selling. Threading that needle has so far proven difficult,” Terrazas said.