What is the Trend in Home Sales in the US?
The current trend in the U.S. housing market, specifically regarding existing home sales, indicates a significant upturn rather than a decline. In a surprising turn of events, existing home sales soared by 9.5% to a seasonally adjusted annualized rate of 4.38 million units in February 2024, according to N.A.R. This growth in existing home sales marked the highest level in a year. This increase is contrary to the market forecasts, which had anticipated a decrease to 3.95 million units from the 4 million recorded in January.
Factors Contributing to the Surge in Existing Home Sales
This boost in sales can be attributed to an increase in housing supply, which has helped to meet the growing market demand. The rise in sales was particularly notable in the West, South, and Midwest regions, while the Northeast maintained steady sales figures. The total housing inventory rose to 1.07 million units, which is a 5.9% increase from January and a 10.3% increase from the previous year. Despite this growth in inventory, the unsold inventory sits at a 2.9-month supply at the current sales pace, which is a slight decrease from 3.0 months in January but an increase from 2.6 months in February of the previous year.
Moreover, the median existing-home price for all housing types in February was $384,500, which is a 5.7% increase from the previous year's figure of $363,600. Price increases were consistent across all four major U.S. regions.
Market Dynamics and Influential Factors
These statistics suggest that the existing home sales market in the U.S. is currently robust, with increased sales and prices indicating a healthy demand and a competitive housing market.
The recent surge in U.S. home sales, defying earlier predictions of a slowdown, can be attributed to several key factors. One of the primary drivers is the steady rise in housing demand, fueled by population growth and robust job creation. These factors have been instrumental in setting the stage for a dynamic housing market.
Another significant factor is the prevailing mortgage rates. While they remain high, they have not deterred the timing of purchases as much as expected. Instead, buyers seem to be navigating the market with a sense of urgency, spurred by the anticipation of potential future rate increases.
Additionally, the inventory of available homes has expanded, offering buyers a wider range of choices. This increase in supply helps to meet the growing demand and supports the rise in sales. The National Association of Realtors (NAR) has forecasted a 13 percent rise in sales for 2024, indicating a strong market outlook.
Moreover, changes in broker commissions, as a result of a recent class action lawsuit settlement, are expected to upend the traditional buying and selling model. This could potentially make the process more transparent and less costly for consumers, thereby encouraging more transactions.
Regionally, price fluctuations continue to vary, but overall, home prices have seen a slower rise compared to recent years. This is likely due to a combination of factors, including the level of local market supply and economic conditions specific to each region.
Bottom Line: The increase in home sales is being driven by a confluence of factors: a strong demand due to demographic and economic growth, the current state of mortgage rates, an increase in housing supply, and significant changes in the real estate transaction process. These elements combine to create a competitive and active housing market that continues to attract buyers despite the challenges of affordability and high borrowing costs.
