Home sales saw modest growth at the start of the year, but rising mortgage rates could put a damper on the spring season.
Existing home sales in February rose 1.7% from January to a seasonally adjusted annual rate of 4.09 million units, according to the National Association of Realtors. Sales decreased by 1.4% compared to February last year.
Because this number represents closed sales, it’s likely that deals were signed in December and January, when mortgage rates fell slightly and remained solid at low levels near 6% for 30-year fixed mortgages. Interest rates were about 1 percentage point higher than a year earlier.
“Despite the modest increase in home sales, actual demand for housing remains slower than wage growth and employment growth,” Realtors Chief Economist Lawrence Yun said in a release. “Wage growth is now almost 4 percentage points outpacing house price growth. Mortgage rates are also visibly lower than they were a year ago.”
Yun also pointed out that annual home sales are now down by 1 million, even though there are now more than 6 million jobs added compared to 2019.
Lower mortgage rates have slightly improved affordability, but inventory shortages remain a major headwind. As of the end of February, the number of units sold was 1.29 million, an increase of 2.4% compared to January 2025 and 4.9% compared to February 2025. At the current sales pace, there will be 3.8 months’ worth of supply, unchanged from January. A six-month supply is considered a balanced market between buyers and sellers.
Sellers who delisted their homes last fall, citing slow sales and weak consumer confidence, are now relisting their homes, according to real estate brokerage Redfin. Approximately 45,000 homes that were delisted last year were relisted in January. This is the highest January figure since Redfin began tracking this metric 10 years ago, and represents 3.6% of homes that went on the market in January.
“Inventories are increasing, but the growth is slow,” Yun said. “If demand increases significantly in the coming months and outstrips supply growth, house prices will inevitably rise. Increasing supply is therefore critical to curbing house price growth, improving housing affordability and boosting transactions.”
But prices are barely rising because supplies are tight. The median price of homes sold in February was $398,000, up 0.3% from the same month last year. Sales at the highest end of the market, those priced at $1 million or more, continue to be strong. Sales at the lowest end of the market declined significantly.
It continues to take 47 days to sell a home, up from 42 days a year ago. First-time buyers accounted for 34% of total sales, up from 31% a year ago. Investors accounted for 16% of sales, unchanged from the previous year.
