Meanwhile, home prices posted their first year-over-year decline since 2012, with the median home price in the United States falling 0.2 percent to $363,000.
The jump in sales activity confirmed assertions by some economists that the US housing market had already reached the bottom of its year-long recession.
“The housing recession ended with the arrival of spring early this year and has real estate brokers cheering Hallelujah,” said Chris Rupke, chief economist at FWD Bonds, a New York-based market research firm.
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The housing slowdown occurred as rising prices in 2020 and 2021 collided with rising interest rates, making home buying less expensive across the board. Home buying activity slowed dramatically during 2022 as the Federal Reserve pumped the brakes on the economy and the typical mortgage rate more than doubled, rising to 7.08 percent.
The housing market is particularly sensitive to interest rate fluctuations because most people acquire new homes with the help of a home loan, which can accrue interest in the tens or hundreds of thousands of dollars in addition to the price of the house. this means Federal Reserve The rate increase added hundreds of dollars a month to the cost of a new mortgage, which convinced many potential homeowners stay out market. But the average mortgage rate fell again to 6.09 percent by early February, prompting some to resume their housing search.
“As mortgage rates change, homebuyers benefit from any decrease in rates,” NAR chief economist Lawrence Yoon said in a press release. Furthermore, we are seeing stronger gains in sales in areas where house prices are falling and local economies are adding jobs.
Prices varied greatly from region to region. In the South and Midwest, home prices rose 2.7 percent and 5 percent, respectively, over the past year, according to the NAR.
Prices fell in the Northeast, where the median home price fell 4.5 percent from a year earlier to $366,100, and in the West, where the median home price fell 5.6 percent to $541,100.
The increase in selling activity was driven by the West, which saw home sales increase by 19.4 percent.
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Analysts say the path forward for prices to move could depend heavily on what happens with interest rates. Interest rates fell again last week as bank failures caused turmoil in the financial system.
The Federal Reserve meets on Tuesday and Wednesday to consider whether more rate hikes are needed to tame inflation. A decision on how much to change interest rates is expected on Wednesday.
Federal Reserve Chairman Jerome H. Powell indicated in remarks to Congress that more interest rate hikes may be needed, but the failure of two technology-focused banks has led to speculation that the Fed may take a more cautious approach.
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Ali Wolf, chief economist at Zonda, wrote on a Tuesday blog post Spring’s strong selling season shows how sensitive housing demand can be to real-time interest rates, as buyers wait for the perfect moment to squeeze out long-term buying plans.
“The new question is – will consumers continue to celebrate the decline in mortgage rates, or will broader economic concerns push them to the sidelines?” asked Wolf.
Zillow Group chief economist Orphe Divounguy said the Fed is trying to “engineer a recovery of the economy” but needs more homes to be available for sale for that recovery to work. In the meantime, lower prices and lower prices could spur additional buying activity, he said.
“If you get a combination of lower rates and significant decreases in mortgage rates, you can see a lot of activity,” Devongwe said in a recent interview.
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