NAR: Existing-Home Sales Decreased to 6.02 million SAAR in February

Inventory down 15.5% year-over-year

From the NAR: Existing-Home Sales Fade 7.2% in February

Existing-home sales dipped in February, continuing a seesawing pattern of gains and declines over the last few months, according to the National Association of Realtors®. Each of the four major U.S. regions saw sales fall on a month-over-month basis in February. Sales activity year-over-year was also down overall, though the South experienced an increase while the remaining three regions reported drops in transactions.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, sank 7.2% from January to a seasonally adjusted annual rate of 6.02 million in February. Year-over-year, sales decreased 2.4% (6.17 million in February 2021). ...

Total housing inventory at the end of February totaled 870,000 units, up 2.4% from January and down 15.5% from one year ago (1.03 million). Unsold inventory sits at a 1.7-month supply at the current sales pace, up from the record-low supply in January of 1.6 months and down from 2.0 months in February 2021.
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The sales rate was below the consensus forecast, as expected by housing economist Tom Lawler.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in February (6.02 million SAAR) were down 7.2% from the previous month and were 2.4% below the February 2021 sales rate.

The Impact of the February 2021 Texas Freeze

When the local data was released, I highlighted the sharp increase in sales in Houston (up 25.6% year-over-year). From the Houston Association of REALTORS® (HAR): February Is a Strong Month for Houston Home Sales

Home sales scored double-digit gains in February, but part of the strong showing was because the statistics compared to last February, when that deadly Texas freeze halted real estate activity for days, and in some cases, even longer. Undistorted by the weather factor were the continued squeeze on inventory, which returned to its all-time low, and pricing, which due to limited supply and ongoing consumer demand, soared to record highs. 

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In February 2022, the only region that showed a year-over-year increase was the South (an increase from the weak sales in 2021 due to the freeze). The other regions were down an average of 6.7% year-over-year compared to the 2.4% reported by the NAR for the entire country.

Sales Year-over-Year and Not Seasonally Adjusted (NSA)

The second graph shows existing home sales by month for 2021 and 2022.

Sales declined 2.3% year-over-year compared to January 2021. This was the seventh consecutive month with sales down year-over-year.

The third graph shows existing home sales for each month, Not Seasonally Adjusted (NSA), for a few selected years. The Orange line is for 2005 (record sales), and the black lines are for record low years (2008 and 2010). The dashed red line is for 2020 (Sales were distorted by the pandemic and boomed late in the year).

This also shows that January and February are usually the lowest sales months of the year NSA, and there is a large seasonal adjustment factor.

Sales NSA in February (357,000) were 2.5% below sales in February 2021 (366,000).   This decrease, NSA, was the same as in the markets I track each month.

Housing Inventory is Slightly Above Record Low

The fourth graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 0.87 million in February from 0.85 million in January. Inventory is now just above the record low.

Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The fifth graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory is very low and was down 15.5% year-over-year (YoY) in February.  Also, as housing economist Tom Lawler has noted, the local MLS data shows an even larger decline in active inventory (the NAR appears to include some pending sales in inventory). Lawler noted:

"As I’ve noted before, the inventory measure in most publicly-released local realtor/MLS reports excludes listings with pending contracts, but that is not the case for many of the reports sent to the NAR (referred to as the “NAR Report!”), Since the middle of last Spring inventory measures excluding pending listings have fallen much more sharply than inventory measures including such listings, and this latter inventory measure understates the decline in the effective inventory of homes for sale over the last several months."

It seems likely that active inventory is down close to 22% year-over-year.

Months-of-supply at 1.7 months is just above the record low set in January 2022.

It is possible inventory will be up year-over-year sometime in 2022, but inventory will still be at very low levels.

Median House Price Growth Still Strong

On prices, the NAR reported:

The median existing-home price for all housing types in February was $357,300, up 15.0% from February 2021 ($310,600), as prices grew in each region. This marks 120 consecutive months of year-over-year increases, the longest-running streak on record.

Median prices are distorted by the mix (repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices).

The YoY change in the median price peaked at 23.6% in May and slowed to 12.6% in October (still very strong increase in prices). But has picked up a little again, and the YoY increase in February was similar to the YoY increase in January.

Finally, as usual, housing economist Tom Lawler's forecast was closer to the NAR report than the Consensus. The NAR reported 6.02 million SAAR, Lawler estimated the NAR would report 5.97 million SAAR, and the consensus was 6.16 million SAAR.

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