Sales of existing homes dipped 7.2% in February after recording a sharp 6.6% rise in January, the National Association of Realtors reported on Friday.
Elevated home prices and rising mortgage rates to above 4% for the first time since 2019 drove sales to decline on the month. Sales drops were seen from both single-family homes and condos.
The median price for existing homes rose to $357,300 from $350,000 previously, remaining historically high because of strong demand and depleted supply for housing as the economy recovers from the COVID-19 pandemic.
We expect the market, however, to cool down substantially in 2022 as the Federal Reserve continues to raise interest rates, and at the same time, with supply picking up based on recent data on housing starts and permits. But the market is still quite far away from a healthy amount of around six months of inventory, with supply currently sitting at only 1.7 months.
The composition of buyers in February saw an uptick in the share of first-time buyers to 29% from 27%, while the share of investors dropped to 19% from 22% in the prior month.
Many buyers, including first-time buyers, have been priced out of the market due to elevated prices. Without a meaningful improvement in supply in the next couple of months, we will see the shelter component of inflation continue to remain sticky.
