Mar 23, 2021 - Economy

U.S. home sales decline but prices still rise double digits

Existing-home sales fell 6.6% in February from the previous month, but sales are still 9.1% higher than last year, per the National Association of Realtors.

By the numbers: Despite sales falling to a six-month low, the median existing-home sales price rose to $313,000, 15.8% higher than February 2020, with all regions posting double-digit price gains.

Between the lines: Housing inventory in February fell to a record low of 1.03 million units, down by 29.5% year over year — the fastest decline on record.

  • Properties typically sold in 20 days, which was also a record, NAR said, and homes with price tags between $250,000 and $500,000 were on the market for just 14 days.

The big picture: Rising mortgage rates are putting housing out of reach for an increasing share of the population, however dwindling supply likely means prices will continue to go up even as the rate of sales in the market declines.

What to watch: Even with the housing market's sour turn to start 2021, most real estate economists are expecting it to be a banner year.

  • Lawrence Yun, NAR’s chief economist, says he's forecasting this year's sales to outpace 2020's torrid pace, noting in the organization's press release accompanying the data that even after the pullback in February, "the market is still outperforming pre-pandemic levels."
  • The Mortgage Bankers Association similarly is expecting record mortgage purchase originations at $1.57 trillion this year, a spokesman told me last week.

What it means: The housing market is looking a lot like the stock market.

  • While bullish industry analysts like to crow about reopening, vaccines and unleashed reserves, the market is actually being driven by wealthy investors who see few alternatives and are increasingly willing to park their cash in real estate as demand for assets with a real return far outpaces the supply, regardless of the price level.
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