Home prices rise to $363k after sales snap 12mo losing streak. Is this affordable?


NAR’s February existing home sales snapped a 12th declining streak, rising 14.5% to 4.58 million units (annualized, seasonally adjusted). This reverse comes after rates hit the low 6% range during January, which is when people got into contract for February closings. February home prices rose $4,000 along with rising sales, challenging but not ending home affordability in February 2023. Here are a key takeaways for home buyers, affordability notes, and a link to the report.


– Annualized sales of existing (as opposed to newly built) homes was 4.58 million for February (annualized, seasonally adjusted).

– This is up 14.5% from January and down 22.6% from one year ago.

– Available inventory of homes to buy is super low at 980,000 units, same as January.

– Median existing home prices rose $4,000 from $359,000 in January to $363,000 in February.

– The median home price of $363,000 has dropped $50,800 from June peak of $413,800.

– The price down trend since last June is important trend because existing home sales are 87% of all sales (new home sales are the rest).

– So a strong majority of homes for sale are lower in price since last summer

– NAR uses median prices because they say average prices are skewed higher by a small share of high-priced sales.

– This downward price trend should give some relief to buyers, and we now see rates are a huge factor in sales.

– Rates began February at 6% (on Feb 2), ended February near 7% due to stubborn inflation data, and are now at 6.625%.

– The January rate declines were what led buyers into more contracts that closed in February, driving the 14.5% sales increase.

– Existing homes typically remained on the market for 34 days, and 57% of them sold within a month.

– This means low inventory is still causing a lot of competition in the housing market.

– First time buyers were 27% of sales, cash buyers were 28% of sales, and individual investors or second home buyers were 18% of sales.


– So prices are down but speed of sales suggests consistent demand.

– This means there are opportunities for buyers without a rout for sellers.

– Monthly cost on a $363,000 home purchase with 5% down and a 6.625% rate would be $2910 (mortgage payment, insurance, taxes, mortgage insurance).

– If you had no other monthly debt, you’d need to make $81k* per year to qualify for this.

– If you had $600 in credit card, auto, and other monthly debt, you’d need to make $97k* per year to qualify.

– Buyers holding for a home price crash may not see that.

– This might be a sweet spot for 2 reasons.

– First, demand and affordability will increase as stubbornly high inflation wanes and mortgage rates follow.

– February CPI inflation did drop 0.3% to 6%, but it’s still high. And Core CPI only was steady at 5.5%. Hence ‘stubbornly high’.

– But the Fed is deeply committed to beating inflation even with the banking crisis, and rates will follow inflation down.

– Housing demand will rise as rates fall.

– Second, if February’s home sales rise continues, it would validate a rising trend the MBA predicts.

– Here’s the chart showing that trend. When this happens, home prices will rise again.

After a year of declining existing home sales, the 2023-2024 trend is for growth - MBA data - The Basis Point



– This Wednesday (tomorrow), the Fed will balance it’s inflation police job with its bank crisis firefighter job.

– The Fed will announce whether they’ll keep hiking rates to fight inflation, or pause to calm the bank crisis partly triggered by rapid rate hikes.

– And next Friday, we’ll get February Core PCE, the Fed’s preferred inflation measure.

– This will signal rate direction and determine if we’ll have a late Spring homebuying season after all.

– Come back tomorrow to see how that plays out.

– And please reach out with questions.


Existing home sales jumped 14.5% in February, ending 12th month decline (NAR)

Mortgage rates head into March 22 Fed meeting around 6.5%. What’s next?

No, homebuyers aren’t ‘royally screwed’ like misinformed media claims

* To arrive at these qualifying income numbers, I’m using 43% deb-to-income ratio that Federal regs allow for all mortgages of this size in America.




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