The headline existing home sales declined relative to last month with the NAR stating "Despite the drop in home sales for February - which I would attribute to historically-low inventory - the market is still outperforming pre-pandemic levels.".

Analyst Opinion of Existing Home Sales

We are now in the "pandemic normal" - and it seems home sales are on a solid growth footing but note that inventory levels are extremely low limiting how many properties can be sold.

We consider this report worse than last month, and the rate of growth is decelerating.

Econintersect Analysis

• The unadjusted sales rate of growth decelerated 6.8 % month-over-month, up 8.7 % year-over-year - sales growth rate trend slowed using the 3-month moving average.
• The unadjusted price rate of growth accelerated by 1.0 % month-over-month, up 12.6 % year-over-year
• The homes for sale unadjusted inventory decelerated 3.0 % this month compared to last month and is down 29.5 % year-over-year

NAR reported:

• Sales down 6.6 % month-over-month, up 9.1 % year-over-year (reported last month +23.7 % year-over-year)
• Median prices up 15.8 % year-over-year
• The market (from Econoday) expected an existing home sales level of 6.320 M to 6.700 M (consensus 6.500 M) with a reported value of 6.22 million

The graph below presents the unadjusted home sales volumes comparing growth in every month.

Here are the headline words from Lawrence Yun, NAR's chief economist:

Despite the drop in home sales for February - which I would attribute to historically-low inventory - the market is still outperforming pre-pandemic levels.

There may be a possible slowdown in growth in the coming months as higher prices and rising mortgage rates will cut into home affordability.

I still expect this year's sales to be ahead of last year's, and with more COVID-19 vaccinations being distributed and available to larger shares of the population, the nation is on the cusp of returning to a sense of normalcy. Many Americans have been saving money and there's a strong possibility that once the country fully reopens, those reserves will be unleashed on the economy.

Home affordability is weakening. Various stimulus packages are expected and they will indeed help, but an increase in inventory is the best way to address surging home costs.

To remove the seasonality of home prices, here is a year-over-year graph that demonstrates a general improving home price rate of growth.

Econintersect does a more complete analysis of home prices with the Case-Shiller analysis.

The home price situation according to the NAR:

The median existing-home price for all housing types in February was $313,000, up 15.8% from February 2020 ($270,400), as prices rose in every region. February's national price jump marks 108 straight months of year-over-year gains.

According to the NAR;

First-time buyers were responsible for 31% of sales in February, down from 33% in January and from 32% in February 2020. NAR's 2020 Profile of Home Buyers and Sellers - released in late 20204 - revealed that the annual share of first-time buyers was 31%.

Individual investors or second-home buyers, who account for many cash sales, purchased 17% of homes in February, up from 15% in January and equal to the percentage from February 2020. All-cash sales accounted for 22% of transactions in February, up from both 19% in January and from 20% in February 2020.

Distressed sales5 - foreclosures and short sales - represented less than 1% of sales in February, equal to January's percentage but down from 2% in February 2020.

Unadjusted Inventories are below the levels of one year ago.

Total housing inventory at the end of February amounted to 1.03 million units, equal to January's inventory and down 29.5% from one year ago (1.46 million). Unsold inventory sits at a 2.0-month supply at the current sales pace, slightly up from January's 1.9-month supply and down from the 3.1-month amount recorded in February 2020. NAR first began tracking the single-family home supply in 1982.

Caveats on Use of NAR Existing Home Sales Data

The National Association of Realtors (NAR) is a trade organization. Their analysis tends to understate the bad and overstate the good. However, the raw (and unadjusted) data is released which allows a completely unbiased analysis. Econintersect analyzes using the raw data. Also, note the National Association of Realtors (NAR) new methodology has a moderate back revision to the data - so it is best to look at trends, and not get too excited about each month's release.

Econintersect determines the month-over-month change by subtracting the current month's year-over-year change from the previous month's year-over-year change. This is the best of the bad options available to determine month-over-month trends - as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).