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Existing Home Sales: Sharp Decline Amid Higher Rates

March 18, 2022
Bottom Line: Existing home sales fell sharply, dropping over 7%, in February as mortgage rates rose, hampering affordability. The south was the only region to experience stronger activity than a year ago. Overall conditions remained tight with inventory increasing only slightly, pushing months' supply up to 1.7, still well below the six-month level that would historically be considered normal. Median and average home prices were higher, despite the increase in mortgage rates, as cash and second-home buyers remained significant. All-cash sales accounted for 25% of sales, down from 27% in the previous month but still historically high. Overall, existing home sales have likely peaked until mortgage rates drop again, but so far, the level of activity remains historically robust amid tight supply conditions.
Existing Home Sales FELL by 7.2% in February to 6.02 million, compared with market expectations for a decline to 6.10 million. The prior month was revised down from 6.50 to 6.49 million.  Home re-sales are now 2.4% BELOW their year-ago level.
The Inventory of Homes Available for Sale ROSE by 2.4% to 870k but are still 15.5% BELOW  their year-ago level. Because inventories increased while sales declined, the Months Supply ROSE to 1.7 months from 1.6 months.  This is BELOW the 6 month level that is considered 'normal'.

Home Prices
ROSE compared to their year-ago levels. Average home prices are 8.4% ABOVE their year-ago levels while median home prices are 15.0% ABOVE their year-ago levels.
Article by Contingent Macro Advisors