Home prices rose 15% to a median price of $357,300 in February from last year, as inventory stubbornly stayed near record lows, according to a report from the National Association of Realtors. But even as home prices continued to climb, sales slowed.
Sales of existing homes – which include single-family homes, townhomes, condominiums and co-ops – were down 7.2% from January and 2.4% from a year ago, NAR reported.
“Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases,” said Lawrence Yun, NAR’s chief economist. “Some who had previously qualified at a 3% mortgage rate are no longer able to buy at the 4% rate.”
Yun said given the jump in home prices and climbing rates, the cost of buying a home is significantly higher than a year ago.
For a buyer who closed on a median-priced home in February with a 30-year fixed rate mortgage, monthly payments are 28% higher than they were a year ago, Yun said.
Inventory slightly up
A lack of available homes for sale has made the housing market even more competitive, pushing prices higher. The inventory of unsold homes crept up 2.4% from last month to 870,000 at the end of February, but it was still down 15.5% from a year ago.
Homes typically remained on the market for only 18 days in February. But even if a buyer could get hold of a home before it was sold, they were still facing the hurdle of rising costs.
However, first-time buyers, who have increasingly been squeezed out of the market, made small gains in February, with their share of existing home purchases rising to 29% from 27% in January.
“The sharp jump in mortgage rates and increasing inflation is taking a heavy toll on consumers’ savings,” Yun said. “However, I expect the pace of price appreciation to slow as demand cools and as supply improves somewhat due to more home construction.”
Price growth continues
February’s 15% jump in median home prices marks 120 consecutive months of annual price growth – or 10 years.
After a decade of home price increases, the current US median home sales price is more than double the $155,600 median in February 2012, when home prices began their current streak, said Danielle Hale, Realtor.com’s chief economist.
The recent ramp-up in new home construction will help add much needed supply to the market, said Hale.
“Our expectation is that home sales will remain relatively high throughout 2022, as homebuyers get creative about how to spend their housing budget amid rising prices of competing expenses like energy, food, and child care, driven up by inflation,” she said.
“So far, buyer activity has been resilient to the extra costs of homeownership, but demand will be tested by an extraordinary year.”