Sales of existing homes decreased 7.2 percent last month, on a seasonally adjusted basis, and were down 2.4 percent year over year, the National Association of Realtors said Friday. This comes after sales rose 6.7 percent in January.
The median price for existing single-family homes hit $357,300 in February, up from $350,300 the previous month and representing a 15 percent jump from the same time a year ago. This marks the 120th consecutive month of year-over-year increases, the longest streak on record, according to the trade group.
“Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases,” Lawrence Yun, chief economist with the National Association of Realtors, said.
But there are signs the market may be starting to loosen up. After hitting a record low in January, total housing inventory ticked up 2.4 percent last month. It’s still 15.5 percent below the same period in 2021, but more new homes are being built. After years of underbuilding, new home construction jumped 6.8 percent in February over the previous month and soared 22 percent over the same period last year, according to the National Association of Home Builders. That’s the strongest pace since 2006. Building permits dipped 1.9 percent last month compared to January, but they were up 7.7 percent over the same period last year, according to data from the Census Bureau.
Builders remain concerned by high construction costs and rising mortgage rates. The average rate for a 30-year loan topped 4 percent this week, the highest rate since May 2019. More increases are on the way as interest rates rise, but they aren’t expected to slow down the bidding wars in hot markets.
“A lot of households have had a harder time finding starter homes that are a little bit smaller and in the bottom third of home prices,” Taylor Marr, deputy chief economist with real estate brokerage Redfin, said. “Buyers can’t continue to afford this level of price growth, so some buyers might be priced out of the market.”
In fact, homes are appreciating so rapidly that a record 6 million homes were valued at $1 million or more in February, according to a Redfin analysis. That’s up from just 3.5 million homes two years ago. Last year, nearly 150 cities — including Haley, Idaho, and Brentwood, Tennessee — saw the average value of a home pass the $1 million mark for the first time, based on Zillow’s home value index.
“The total list of million-dollar cities is 481, so to add almost 150 in one year is a large jump and the biggest we’ve ever seen,” Nicole Bachaud, an economist with Zillow, said. “We’ll see a similar number or more added in 2022 because appreciation is so high and the market is moving so fast right now.”
Roger Pettingell is a broker with Coldwell Banker Realty in Sarasota, Florida. He said home prices increased dramatically during the pandemic as homebuyers from the Northeast and California moved in.
“These new buyers don’t look for the same thing as previous clients,” Pettingell said. “They want dual offices, home gyms. Home theaters are back.”
Between 2020 and 2021, the average home value in Holmes Beach, a town in the Sarasota metro area, jumped from $748,181 to $1,081,872, according to Zillow.
Pettingell has been a broker in the area for 35 years and said he’s never seen home prices climb so quickly. “It’s hard to speak about affordable housing existing anywhere,” he said.
In Waukesha, Wisconsin, the average value of a home in Lac La Belle village went from $950,562 in 2020 to slightly more than $1.1 million last year, according to Zillow.
“I’ve seen prices appreciate but not nearly like this,” John Gscheidmeier, a broker with RE/MAX Service First in Waukesha, said. “People don’t think in the Midwest there is as much money. But let’s be honest, you can work with a tech company in California and live anywhere.”