Affordability challenges remain

Clearly, lower rates were the biggest driver behind higher sales in February.

February usually marks the beginning of the spring buying season and buyer and seller activity usually picks up as the weather warms and the end of the school year approaches.

With soaring prices and high Mortgage Rates continuing to stifle buyer activity, this spring market is expected to be softer than a couple of years ago.

Mortgage rates began to fall in February, but rose on inflation fears, which ended the month about half a percentage point higher. This upward trajectory in rates has recently been interrupted by concerns about the health of the financial system after numerous bank failures. This has led to lower prices over the past week.

A sign of Credit Suisse is seen behind a sign of Swiss bank UBS, in Zurich on March 18, 2023. Switzerland's largest bank, UBS, is in talks to buy all or part of Credit Suisse, according to a report from the Financial Times. Credit Suisse - Switzerland's second largest bank - came under pressure this week as the failure of two US regional lenders rattled the sector.

Credit Suisse went the way of Bear Stearns in 2008. But this crisis is different

The future of mortgage rates will be affected by what action the Federal Reserve decides to take with benchmark rates at its two-day policy meeting that concludes on Wednesday.

  Home sellers considering putting their homes on the market will still be in a strong position to take advantage of home equity, because low inventory and strong buying demand have kept prices strong in many places. "But the diminishing pool of buyers makes the task more difficult."

She added: “Home sales remained well below last year’s level, suggesting that significant gains in affordability must be made before buyers can return to the market en masse.

The median home price in the United States was lower in February this year than it was in February 2022, ending more than a decade of annual increases, the longest on record, according to a National Association of Realtors report released Tuesday.

The current median home price was $363,000 in February, down 0.2% from a year ago. This marks the first month-on-year decline in prices since February 2012.

Regionally, prices fell more than last year in the West (down 5.6%) and the Northeast (down 4.5%), as housing became more affordable. But prices continued to be higher than a year ago in the South (up 2.7%) and the Midwest (up 5%).

"This is not a price bottom line," said Lawrence Yoon, chief economist at NAR. “We expect a sustained price correction, but we don't expect a price collapse.”

He said the average drop is very small, and it's basically flat. But it marks the first technical decline in median home prices that is expected to continue.

Could we see a 5% drop? Absolutely, but we could also see a 5% increase. Expect prices to drop 2% this year.

But home sales jumped higher, posting the largest monthly percentage increase since July 2020, which itself was an anomaly for the pandemic as some restrictions were eased that month to allow for a backlog of sales.

US home sales rose in February, after a full year of declining home sales due to rising mortgage rates and prices remaining high kept homebuyers out of the market. The sales reversal in February also ended the longest streak of declines on record in home sales on a monthly basis, dating back to 1999 for all homes and 1968 for single-family homes.

  Single-family homes are seen in a residential neighborhood on October 27, 2022 in Miramar, Florida. The 30-year fixed rate mortgage rate was 7.08%, up from 6.94% in the previous week, according to Freddie Mac. Mortgage rates exceeded 7% for the first time since April 2002 (Photo by Joe Riedel/Getty Images)

Mortgage rates drop in the wake of bank failures

Existing home sales -- which includes single-family homes, townhouses, condominiums and co-ops -- increased 14.5% in February compared to January. But sales are down 22.6% from a year ago.

Seasonally adjusted annual sales pace decreased from 5.92 million units last year to 4.58 million units. The sharp decline in sales activity was driven by the large increase in mortgage rates over the past year