US existing home sales drop sharply; prices surge

WASHINGTON: US home sales fell more than expected in February as cold weather blanketed many parts of the country, and a rebound could be muted by rising mortgage rates as well as higher house prices amid tight supply.

The National Association of Realtors said on Monday that existing home sales dropped 6.6% to a seasonally adjusted annual rate of 6.22 million units last month.

Economists polled by Reuters had forecast sales would drop 3.0% to a rate of 6.50 million units in February. Home resales, which account for the bulk of US home sales, increased 9.1% on a year-on-year basis. Last month, sales declined in the Northeast, South and the Midwest, but rose in the West.

Bitterly cold weather, including severe winter storms in Texas and other parts of the densely populated South region, disrupted economic activity last month, depressing retail sales, production at factories and homebuilding.

Warmer temperatures, an acceleration in the pace of COVID-19 vaccinations and massive fiscal stimulus are expected to spur a sharp rebound in activity in March.

The housing market, however, is seen lagging after being one of the main drivers of the economic recovery as Americans sought bigger and more expensive houses for home offices and remote schooling during the pandemic.

Home resales have been running ahead of contracts. The 30-year fixed-rate mortgage has risen to a nine-month high of 3.09%, according to data from mortgage finance agency Freddie Mac. Though mortgage rates remain historically low, the sustained increase since February is contributing to making homeownership more expensive for first-time buyers.

Mortgage rates have risen in tandem with US Treasury yields, which have spiked in anticipation of stronger economic growth this year and higher inflation.

The median existing house price jumped 15.8% from a year ago to $313,000 in February. Prices are being squeezed higher by an acute shortage of homes available for sale. There were 1.03 million previously owned homes on the market in February, a record 29.5% decline from one year ago.

Builders are being constrained by record lumber prices as well as shortages of land and labor. At February's sales pace, it would take two months to exhaust the current inventory, an all-time low and down from 3.1 months a year ago.

A six-to-seven-month supply is viewed as a healthy balance between supply and demand.