WASHINGTON (TLNA) — Existing home sales surged in February, marking the highest rate in a year, as increased supply began to alleviate the market’s strain caused by high rates and low inventory, which had driven up home prices and monthly mortgage payments.

Sales Soar Amid Supply Increase

The National Association of Realtors reported a 9.5% increase in existing home sales last month, the largest monthly surge since February of the previous year. Despite this, sales were down 3.3% from the previous year, signaling a downturn in the housing market affected by elevated prices and interest rates.

Prices Continue Upward Trend

February saw a continuation of the upward trend in prices, with the median existing home sales price rising by 5.7% to $384,500. This marked the eighth consecutive month of year-over-year price gains, reflecting the persistent pressure on affordability.

Relief in Sight with Increased Inventory

The market received some relief from the shortage of available homes, with the inventory of unsold existing homes increasing by 5.9%. This boost in supply, albeit modest, comes after a prolonged period of low inventory, driven in part by homeowners’ reluctance to move amid higher interest rates.

Prospects for Spring Market

As spring approaches, more homes are expected to enter the market, providing buyers with additional options and potentially easing price pressures. At the end of February, there were 1.07 million unsold homes on the market, the highest inventory since 2020, offering hope for a more balanced market.

Anticipated Impact of Settlement

Experts predict a further increase in inventory later in the year, coinciding with a settlement expected to lower realtor commissions starting in July. This development could potentially save homebuyers billions in commission fees, contributing to a more affordable housing market.

Mortgage Rates and Affordability Challenges

While mortgage rates have slightly eased compared to the previous year, they remain high, impacting buyers’ purchasing power and affordability. With rates averaging 6.74% for a 30-year fixed-rate mortgage as of March 14, many homeowners are hesitant to sell, exacerbating inventory shortages.

Rental Market Dynamics

High home prices and interest rates have also intensified pressures in the rental market, where rents are already elevated. Although rents declined nationally in 2023 due to increased construction, 2024 has seen a reversal of this trend, particularly in areas facing challenges with profitability amid rising costs.

Future Outlook and Affordability Concerns

Looking ahead, the Federal Reserve’s potential interest rate cuts may offer some relief, but the impact on housing affordability is expected to be limited. With the U.S. facing a shortage of millions of housing units, achieving meaningful affordability remains a challenge.

Advocating for Housing Affordability

As the housing market grapples with soaring prices and limited inventory, ensuring affordability is paramount for enabling individuals to make choices that align with their financial well-being. With the current economic landscape posing challenges to affordability, addressing housing affordability issues remains a critical endeavor for policymakers and stakeholders alike.

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