Housing Market Cools as Mortgage Rates Tick Back Above 7%
The U.S. housing market showed fresh signs of cooling in February as mortgage rates climbed back above 7%, pricing out many would-be buyers and dragging existing home sales to their lowest level in four months.
The National Association of Realtors reported that existing home sales fell 3.4% from January to a seasonally adjusted annual rate of 3.97 million units — below the 4.1 million pace economists had expected.
Rates Are the Culprit
The average rate on a 30-year fixed mortgage climbed to 7.04% last week, according to Freddie Mac, reversing a modest decline seen at the start of the year when investors had hoped the Federal Reserve would begin cutting rates sooner.
At today's rates, the monthly payment on a $400,000 mortgage is roughly $2,670 — about $800 more per month than three years ago when rates were near 4%.
Inventory Ticks Up, but Not Enough
The number of homes available for sale rose 5.2% from January to 1.08 million units, representing a 3.3-month supply — well below the 4-to-6 months typically considered a balanced market.
- Median existing home price: $412,500, up 4.1% year-over-year.
- First-time buyers accounted for 26% of sales, down from 28% a year ago.
- All-cash sales represented 33% of transactions, above the historical norm.
- Distressed sales remained low at 2% of total sales.
“Affordability conditions are still very challenging for first-time buyers. Until rates come down meaningfully or we see a significant surge in new listings, activity is going to remain subdued.”