US existing home sales beat expectations as mortgage rates cool

Sales of previously owned US homes exceeded analyst expectations in February as mortgage rates ticked down, allowing more buyers to afford properties, industry data showed Tuesday.

Existing home sales rose by 1.7 percent from the prior month, said the National Association of Realtors (NAR).

This took sales to a seasonally adjusted annual rate of 4.09 million, above the 3.86 million pace that surveys of economists by Dow Jones Newswires and The Wall Street Journal forecast.

Home sales were, however, still down by 1.4 percent on a year-on-year basis, the NAR said.

"Housing affordability is improving, and consumers are responding," said NAR chief economist Lawrence Yun.

US home sales have been sluggish in recent times as a rise in mortgage rates after the Covid-19 pandemic weighed on affordability.

Homeowners who had already locked in lower rates prior to the increase also became reluctant to enter the market, limiting the amount of properties available.

But in February, the average 30-year fixed-rate mortgage came in at 6.05 percent, with average rates even dipping under six percent late in the month for the first time since 2022.

This was lower than in January and also a notable pullback from 6.84 percent a year ago.

"Still, there is a long way to go to return to pre-pandemic levels of transaction activity," Yun added in a statement.

He noted that "despite the modest gain in home sales, actual housing demand remains muted relative to wage growth and job gains."

And even though inventory is growing, it has been doing so at a tepid pace.

Yun warned that if demand picks up significantly over the coming months and outpaces supply growth, "home prices will inevitably rise."

He called for a push to increase the supply of properties on the market.

The median price of previously owned homes was $398,000 in February, up slightly from a year ago.

But this marked the 32nd straight month of year-on-year price increases, the NAR said.