Rising home prices, limited inventory and the uptick in mortgage rates continued to deter some homebuyers last month as sales of existing homes fell 6.6% in February to a seasonally-adjusted annual rate of 6.22 million, according to the National Association of Realtors.
The median existing-home price for all housing types in February was $313,000, up 15.8% from Feb. 2020, as prices rose in every region. February’s national price jump also marked 108 straight months of year-over-year gains — that’s nine years of home prices not backing down.
Compared to one year ago, median home prices increased in each of the four major regions. Feb. 2021 saw the median price rise by 20.5% in the Northeast, up 14.2% in the Midwest, up 13.6% in the South and up 20.6% in the West compared to Feb. 2020.
National Association of Home Builders Chairman Chuck Fowke noted that supply shortages and high demand have caused lumber prices to jump “about 200%” since April 2020, adding approximately $24,000 to the price of a new home.
“Though builders continue to see strong buyer traffic, recent increases for material costs and delivery times, particularly for softwood lumber, have depressed builder sentiment this month,” said Fowke. “Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021.”
In the last few years, the number of existing single-family homes for sale has decreased. But home prices have increased. To make homeownership a possibility for everyone, there needs to be a higher supply of affordable homes.
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Total housing inventory at the end of February amounted to 1.03 million units, equal to January’s inventory and down 29.5% from one year ago. Unsold inventory sits at a mere 2 month supply at the current home sales pace.
But Lawrence Yun, NAR’s chief economist, noted the possibility of slower growth in the coming months as higher prices and rising mortgage rates cut into home affordability.
“Affordability is weakening,” Yun said. “Various stimulus packages are expected and they will indeed help, an increase in inventory is the best way to address surging home costs.”
However, many Americans have been saving money, and there’s a strong possibility that once the country fully reopens, those reserves will be unleashed on the economy. Demand has yet to be contained as the market is still outperforming pre-pandemic levels with sales 9.1% higher existing home sales than a year ago.
The Mortgage Bankers Association‘s recent purchase applications data has mirrored that there is still strong demand for homes, likely driven by an improving job market and interest from first-time homebuyers, as well as mortgage rates – which remain quite low from a historical perspective, even with the recent increases.
“We are anticipating a strong spring housing market,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “However, this is dependent on both builders ramping up production, and current owners listing their homes for sale. The lack of inventory on the market is preventing home sales from being much higher.”