Home sales saw a slight gain early in the year, but rising mortgage rates could now throw cold water on the spring season.
Existing home sales in February increased 1.7% from January to a seasonally adjusted annualized rate of 4.09 million units, according to the National Association of Realtors. Sales were down 1.4% compared to February last year.
This tally represents closed sales, so the deals were likely signed in December and January, when mortgage rates fell slightly and remained solidly in a low range, near 6% on the 30-year fixed mortgage. Rates were about a percentage point higher than the previous year.
“Despite the modest rise in home sales, real housing demand remains subdued relative to wage growth and employment gains,” Lawrence Yun, chief economist at Realtors, said in a statement. “Wage growth now outpaces house price growth by almost four percentage points. Mortgage rates are also significantly lower than a year ago.”
Yun also noted that there are more than 6 million more jobs than in 2019, but annual home sales are down by a million.
Lower mortgage rates have helped improve affordability slightly, but low inventory remains a significant headwind. At the end of February, 1.29 million units were on sale, an increase of 2.4% from January and 4.9% from February 2025. At the current sales pace, this represents a supply of 3.8 months, unchanged from January. A six-month supply is considered a balanced market between buyer and seller.
More sellers who listed their homes last fall, due to slowing sales and low consumer confidence, are now relisting their homes, according to Redfin, a real estate brokerage. Nearly 45,000 homes written off last year were put back on sale in January. This is the highest January figure since Redfin began tracking this metric a decade ago and represents a record 3.6% of homes put on the market in January.
“Stocks are increasing, but slowly,” Yun said. “If demand accelerates significantly in the coming months and outpaces supply growth, house prices will inevitably rise. This is why increasing supply is so important to help limit house price growth, improve housing affordability and stimulate transactions.”
However, limited supply keeps prices only slightly higher. The median price of a home sold in February was $398,000, an increase of 0.3% year over year. Sales continue to be strongest in the highest price category, properties listed at $1 million or more. Sales are down sharply at the low end of the market.
It always takes longer to sell a house, 47 days, compared to 42 days a year ago. First-time buyers represented 34% of total sales, compared to 31% a year ago. Investors accounted for 16% of sales, unchanged from a year ago.