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Existing home sales fell 6.6% in February to a seasonally adjusted annual rate of 6.22 million units, according to the National Association of Realtors. Sales in February marked a 9.1% increase compared to 5.7 million units last year.
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Housing inventory reached a record low of 1.03 million units as of the end of February, a 29.5% year-over-year decline compared to 1.46 million units. At the current sales pace, it would take two months to exhaust the supply, slightly above 1.9 months in January but below 3.1 months recorded a year ago.
However, the report shows housing demand is strong with properties selling after an average of 20 days on the market, the fastest pace on record, compared to 21 days in January and 36 days in February 2020. Approximately 74% of homes sold in February 2021 were on the market for less than a month.
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Despite the drop in existing home sales, NAR chief economist Lawrence Yun says the real estate market is still outperforming pre-pandemic levels.
“I still expect this year’s sales to be ahead of last year’s, and with more COVID-19 vaccinations being distributed and available to larger shares of the population, the nation is on the cusp of returning to a sense of normalcy,” Yun said. “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.”
However, Yun warned a potential slowdown in growth could come as higher prices and rising mortgage rates will cut into home affordability.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 2.81% in February, up from 2.74% in January. The average commitment rate across all of 2020 was 3.11%.
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The median existing-home sales price rose to $313,000, a 15.8% increase compared to $270,400 a year ago. The increase in February marks 108 straight months of year-over-year gains.
The median existing single-family home price was $317,100 in February, up 16.2% year-over-year, and the existing condo price was $280,500 in February, up 12.3% year-over-year. Sales of homes priced above $1 million were 81% higher compared with a year ago, while houses priced between $100,000 and $250,000 fell 11%.
Regionally, exisiting home sales plummeted 14.4% in the Midwest, 11.5% in the North, 6.1% in the South, and 4.6% in the West. The median prices were $231,800 in the Midwest, a year-over-year increase of 14.2%, $356,000 in the Northeast, a year-over-year increase of 20.5%, $271,200 in the South, a year-over-year increase of 13.6% and $493,300 in the West, a year-over-year increase of 20.6%.
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First-time buyers were responsible for 31% of sales in February, down from 33% in January and from 32% in February 2020. Meanwhile, Individual investors or second-home buyers, who account for many cash sales, purchased 17% of homes in February, up from 15% in January and equal to the percentage from February 2020.
All-cash sales accounted for 22% of transactions in February, up from both 19% in January and from 20% in February 2020. Distressed sales, including foreclosures and short sales, represented less than 1% of sales in February, equal to January’s percentage but down from 2% in February 2020.
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