CUs See Glimmer of Good News as Existing Home Sales Surge Nearly 10%

Existing home sales rose in February at their strongest pace in a year despite continued high interest rates.

The National Association of Realtors reported Thursday that existing homes sold at a seasonally adjusted annual rate of 4.38 million in February, down 3.3% from a year earlier but up 9.8% from January. It was the biggest month-to-month increase since February 2023.

Interest rates hovered near 7% and more than half of homes sold for at least $384,500, up 5.7% from the median price a year earlier.

But NAR Chief Economist Lawrence Yun said supplies are improving. The inventory of unsold existing homes increased 5.9% from one month ago to 1.07 million at the end of February, or the equivalent of 2.9 months’ supply at the current monthly sales pace.

“Additional housing supply is helping to satisfy market demand,” Yun said. “Housing demand has been on a steady rise due to population and job growth, though the actual timing of purchases will be determined by prevailing mortgage rates and wider inventory choices.”

February’s gain followed a 3.1% increase in existing home sales from December to January.

Credit unions might have had a taste of that. Their balances of first mortgages Jan. 31 were 6.4% higher than a year earlier — the best 12-month gain since June 2023, according to the America’s Credit Unions trade group. That gain occurred despite first mortgage originations in the fourth quarter being down 20% from a year earlier, according to NCUA data.

Further gains will depend greatly on interest rates falling, which means waiting for the Fed to act.

Curt Long, chief economist for America’s Credit Unions, said the Fed’s statements following its meeting that ended Wednesday showed that most members of the Federal Open Market Committee still expect to lower rates three times this year.

Long said the Fed is keeping its options open “given the array of mixed data at present, including solid overall growth, an upward drift to unemployment, warming inflation, and concerns that faulty seasonal adjustments could be tainting all the above.”

“A June rate cut is possible, but it will hinge on the next two inflation points,” Long said.

MBA Chief Economist Mike Fratantoni expects the FOMC to cut the federal funds rate three times this year, with the first occurring in June.

Rates for 30-year, fixed-rate mortgages have been near 7% since the start of the year, but the MBA’s Feb. 20 forecast called for them to fall to 6.1% by the end of this year and 5.5% by the end of 2025.

“We continue to expect longer-term rates, including mortgage rates, to decline gradually over the course of this year,” Fratantoni said Wednesday.

Mortgage originations, which have fallen from a historic high in 2021, are expected to start rising this year. The MBA forecast purchases to rise 15% to 1.53 trillion and refinances to rise 50% to $471 billion.