February 2021 Headline Existing Home Sales: Rate Of Growth Slows

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.

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