Sales of existing homes fell 3.1% in February, the second straight monthly decline, as buyers put off purchases because of higher mortgage interest rates, a real estate trade group reported today.
The National Assn. of Realtors said sales of existing single-family homes dropped to a seasonally adjusted annual rate of 3.44 million units in February after a 9.4% decline in January.
Last month’s sales pace was the slowest since March, 1988, when the annual rate was 3.38 million units.
The realtors group attributed the drop in sales to the Federal Reserve Board’s yearlong campaign to drive up interest rates in an effort to slow the economy and ease inflationary pressures.
“The Fed’s credit stance is working,” said association President Ira Gribin. “Interest rates are pushed up and buyers are pushed out.”
Fixed-rate home mortgages last month averaged between 10.55% and 10.78%, according to the Federal Home Loan Mortgage Corp. On one-year adjustable-rate mortgages, lenders were asking an average initial rate of between 8.56% and 8.73%.
The median price of an existing home sold last month rose 3.8% to $93,100 as buyers in the lower price ranges stayed out of the market due to the higher rates.
“Generally, in times of rising rates, the people left in the market tend to be upper-income buyers who can buy the house they want regardless of less affordable financing,” said John Tuccillo, chief economist for the realtors.
February’s decline in home sales was led by a sharp drop in the Northeast, where resales were down 18.3% from the previous month. Sales were down 0.8% in the South and 1.1% in the Midwest.
The West was the only region to record an increase in sales last month, with the annual rate rising 3.2%.