Lower Interest Rates Fuel a Surge in US Home Sales, Boosting Market Momentum
US home sales pick up the pace as interest rates dip
There’s some good news for the US housing market, as sales of previously owned homes surged in February. The National Association of Realtors (NAR) released data on Tuesday that showed sales soaring 14.5% last month to a seasonally adjusted annual rate of 4.58 million. This is the fastest pace in six months for existing home sales. Moreover, it’s higher than the 4.2 million economists predicted, and it ended a 12-month decline that was set to become America’s worst housing slump in a decade.
The recent surge in home sales is in line with a slight dip in mortgage rates, contributing to affordability. The average long-term rate on 30-year mortgages rose to a two-decade high of 7.08% in the fall before eventually easing in December and January. The average rate then fell to 6.60% last week, according to Freddie Mac, which helps to provide mortgages for the National Housing Administration.
A changing market
The surge in home sales comes after a year of tough times for the housing market. Throughout 2021, sales consistently declined due to increasing mortgage rates that followed the Federal Reserve’s successive interest rate hikes. However, February’s numbers show that the market is starting to recover as homebuyers are taking advantage of opportunities for more affordable mortgages.
- According to the NAR, the national median home price fell by 0.2% in February to $363,000.
- Inventory was up 15.3% from last year, with an almost unchanged market supply from last month.
Despite Covid-19, and the many upheavals of 2021, we’re finally seeing some positive signs in the US housing market. While it’s expected that there will be some turbulence in the year ahead, these figures suggest that the market has already started to turn a corner. The surge in home sales shows that affordability is up, interest rates have dropped, and buyers are returning to the market. It’s good news for the industry and a promising indicator for the wider economy.
The US economy is steadily recovering, and the housing market’s resurgence is just a part of that positive momentum. While it’s too early to predict with any certainty what the market will look like in the months ahead, these recent figures suggest that there is cause for hope. It’s a welcome example of America’s resilience and a reminder that the country still has many strong sectors poised for growth and success.