Sales of existing homes fell in February for the second straight month as higher interest rates pushed buyers out of the market, a real estate trade group said Monday.
Sales of existing single-family homes dropped 3.1% last month to a seasonally adjusted annual rate of 3.44 million units, the slowest pace since the 3.38-million rate recorded last March, the National Assn. of Realtors reported.
February’s decline followed an even sharper 9.4% sales drop in January.
The Realtors attributed the recent weakness 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 Realtors 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%.
By last week, the rates were up to 11.22% and 9.30%, respectively.
Because lower-income buyers generally were the ones pushed out of the market by the higher rates, the median price of existing homes sold last month increased, the Realtors reported. The median rose $3,400 to $93,100, meaning half sold for more and half for less.
Gains in West
“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 group.
He said the resale pace is not expected to drop much further because economic growth appears to be slowing to a level acceptable to the Fed.
February’s decline in home sales was led by a sharp drop in the high-priced Northeast, where the market began to cool last year after an earlier surge in prices.
Resales in the region were at a seasonally adjusted annual rate of 580,000 last month, down 18.3% from the previous month. The median price of a home in the Northeast was $142,600, down $1,200 from the previous month.
The higher interest rates “probably will prolong stagnation in some of those markets,” Tuccillo said.
The West was the only region to record an increase in sales last month, with the annual rate rising 3.2% to 650,000 units. The median price in the region was $133,700, up $3,000 from January.
“Strong economic growth in the West has made it better prepared to withstand credit tightening,” Tuccillo said. “This region contains some of the hottest markets in the country now, and buyers there seem to be less affected by hikes in interest rates.”
Sales of existing homes dropped 3.1% last month to a seasonally adjusted annual rate of 3.44 million units.
Source: National Assn. of Realtors