House Sales Are Finally on the Rise

Sales of both existing and new homes in the U.S. jumped up in February, ending a months-long slide that experts linked to a correction of the housing market.

According to data published on Tuesday by the National Association of Realtors (NAR), existing home sales surged by 14.5 percent last month, breaking a 12-month streak of plunges. This is the largest monthly percentage increase since July 2020, when demand for homes grew while interest rates were relatively low.

This doesn't mean that the housing market—specifically when it comes to existing homes—has bounced back to what it was during the booming years of the pandemic, or even just a year ago. Compared to data from February 2022, existing home sales are down 22.6 percent—a sign that higher mortgage rates and a crisis of affordability are still affecting potential homebuyers, as well as sellers.

Prices, which skyrocketed in 2022, are also down compared to last year. According to NAR, the median existing home sales price was down 0.2 percent from the previous year. Admittedly not much, but experts have warned that the correction of the housing market—triggered by an unsustainable combination of low inventory, skyrocketing prices, high demand, and higher interest rates—will not be dramatic.

The situation is similar for new homes. ​​Sales of new single‐family homes in February were at a seasonally adjusted annual rate of 640,000, according to data by the U.S. Census Bureau and the Department of Housing and Urban Development released on Thursday. That's a 1.1 percent increase from the January rate, estimated at 633,000, but 19.0 percent below the February 2022 estimate of 790,000.

But if the situation, in terms of home prices and inventory, hasn't dramatically changed, why are sales now suddenly rising back up?

NAR chief economist Lawrence Yun has an idea. "Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines," he said in a statement following the publication of the new data. "Moreover, we're seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs."

With lower rates and lower prices, homebuyers were likely encouraged to enter the market.

Cris DeRitis, deputy chief economist at Moody's Analytics, also told Newsweek that the rise in home sales could be linked to lower interest rates.

"I attribute that [the rise in home sales] to the decline in the interest rate," he said. "Borrowers are taking advantage of a softening in those rates."

It's not yet clear what impact the Silicon Valley Bank's collapse and the unfolding banking panic could have on the housing market and interest rates.

After the bank failures in the U.S. sparked fears of a wider banking crisis, some expected the Federal Reserve to pause its rate hikes until the markets came down. The Fed instead pressed ahead with its policy of monetary tightening, raising interest rates by a 0.25 percentage point. The increase was still lower than the 0.50 percentage point jump that some expected before the banking failures.

DeRitis thinks that home sales might be affected by the banking failures. "Consumer households may be very reluctant to make a big purchase right now, because of the economic uncertainty, there's fear that unemployment may rise, jobs may be lost, income may be impacted—so I see that as the bigger impact of the bank panic at the moment, versus the direct impact," he said.