Hot Real Estate Market Comes to Screeching Halt in February… What Happened?

If you were waiting to make your move into the white-hot housing market, good luck. Unless you’re willing to pony up a premium price, you may not love the limited supply you’ll find available.

The National Association of Realtors just reported U.S. home sales fell much more than expected in February. On Monday, it was revealed that existing home sales dropped a surprising, 6.6% to a seasonally adjusted annual rate of 6.22 million units last month. Economists polled by Reuters had forecast sales would drop only 3% to a rate of 6.50 million units.

Despite being on the cusp of the traditionally busy spring housing market, homeowners appear, by large, to not be listing their properties for sale at the pace they normally would this time of year. This is being felt most strongly in the supply of homes for sale, which fell 29.5% year-over-year in February, the largest annual decline ever.

At the current sales pace, it would take two months to exhaust this supply. For context, this time last year, there was a three-month supply, which is also considered low.

That tight supply continues to fuel increasing home prices, which were 15.8% higher in February year-over-year. The median price of an existing home sold during the month was $313,000, which is the highest February price on record.

For further context on just how tight the real estate market is getting, consider that we have more registered realtors in the U.S. than we have homes for sale. The National Association of Realtors’ membership count has exceeded the number of homes on the market only once before, in December 2019, when the number of agents dipped slightly but the inventory of homes for sale declined by more. It happened again last October and has held ever since.

At the end of January, there were 1.04 million homes for sale. That is down 26% from a year earlier and the lowest on record going back to 1982, according to NAR. Also in January, the association had 1.45 million members, up 4.8% from a year earlier. This can’t last. Many of the newly-minted agents will fade out because they can’t get enough listings to stay in business.

Looking beyond the current trajectory of home sales, what should be even more concerning for professionals in the housing market is that the possibility of a rebound in the near term could be threatened by rising mortgage rates and higher home prices amid tight supply.

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