Home sales in February, as feeble as they were, benefitted from the lowest mortgage rates in years. Those rates are now gone.
By Wolf Richter for WOLF STREET.
Pending home sales, tracking the number of contracts signed in February, ticked up 1.8% on a seasonally adjusted basis from the downwardly revised record low in January, to still rank among a handful of worst months in the data by the National Association of Realtors. The data goes back to mid-2010.
Compared to February 2011, during the Housing Bust and the first February in the data series, pending sales were down by 18%.
Pending home sales compared to the Februarys in prior years (historic data via YCharts):
- 2025: -0.8% (year-over-year)
- 2024: -3.5%
- 2023: -11.3%
- 2022: -31.3%
- 2021: -35.0%
- 2020: -34.9%
- 2019: -29.2%
- 2018: -32.7%.
But mortgage rates when these contracts were signed in February were a lot lower than now. The average 30-year fixed mortgage rate even dipped into the upper 5%-range in February, the lowest in over three years. And still, it didn’t do much for home sales.
Now, in March, the average 30-year fixed mortgage rate spiked back into the 6.3% to 6.4% range, the highest since last fall, according to the daily measure by Mortgage News Daily.
Pending home sales plunged in the Northeast to the second-lowest on record, behind only lockdown March 2020, but rose in the other three regions, seasonally adjusted.
The metric of pending sales tracks contracts that were signed in February but that haven’t closed yet and could still get canceled because buyers cannot afford homeowner’s insurance, or cannot sell their own home, or for other reasons. The rate of cancellations has been running high.
Pending home sales by region.
A map of the four Census Regions is posted in the comments below.
In the South, pending sales rose by 2.7% in February from January, seasonally adjusted, following back-to-back drops in January and December.
Compared to the Februarys of prior years:
- 2025: +1.2% (year-over-year)
- 2024: -1.7%
- 2023: -10.5%
- 2022: -31.0%
- 2021: -34.2%
- 2019: -27.4%.
In the Northeast, pending sales dropped by 3.6% month-to-month, the third steep month-to-month drop in a row, to the second-worst sales on record, behind only lockdown-March 2020.
Compared to the Februarys of prior years:
- 2025: -12.1% (year-over-year)
- 2024: -13.5%
- 2023: -20.1%
- 2022: -35.2%
- 2021: -41.1%
- 2019: -39.5%.
In the Midwest, pending sales rose by 4.6% in February from January, seasonally adjusted, the second increase in a row after the 12.7% plunge in December to a record low in the data going back to mid-2010.
Compared to the Februarys of prior years:
- 2025: -0.1% (year-over-year)
- 2024: -3.4%
- 2023: -11.2%
- 2022: -26.3%
- 2021: -29.4%
- 2019: -20.3%.
In the West, pending sales inched up by 0.9% in February from January, the second increase after the 10.6% plunge in December, seasonally adjusted.
Compared to the Februarys of prior years:
- 2025: +3.2% (year-over-year)
- 2024: +0.9%
- 2023: -5.8%
- 2022: -35.1%
- 2021: -38.5%
- 2019: -33.3%.
So not surprisingly, the housing resale market remains frozen, hampered by too-high home prices that had exploded during the years of ultra-low mortgage rates thanks to the Fed’s reckless monetary policies at the time; and hampered by the super-low mortgages still out there that prevent many homeowners from moving into a new home because they cannot afford to, or don’t want to, give up their current deal, thereby depressing home sales, and everything that goes along with it, such as moving expenses and buying new stuff for the new home, which has been putting a damper on consumer spending. The housing market is now in the fourth year of this situation.
But homebuilders are building and selling at a solid pace. And they’re putting new supply on the market. They’re not frozen.
Lennar’s home sales have surged by 35% compared to the same period in 2022, even as the resale market has plunged over the same period (pending sales -31%). To get there, Lennar cut its average selling price by 24% from the peak in 2022, back to 2017 levels, gunning for the efficiencies of volume to bring down construction costs. Revenues per square foot have dropped, profit margins and profits have plunged, but home sales have surged. “We are adapting to market conditions as they are and not waiting for the market to bounce back,” said Lennar’s CEO during the earnings call [read: What it Takes to Sell Homes in this Market]. Bring on the new supply!
In case you missed it: Supply of Single-Family Homes Surges to Highest for February in 9 Years, Demand Stuck in the Deepfreeze
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The four Census Regions of the US:
Thanks for the great article. Mainstream media all touting pending sales rise when the real story is, as you pointed out, they’re down YoY and historically poor going back to great recession.
Hmmmmmm…..,perhaps some folks might consider dropping their prices,nah,the insanity for the near future feel will continue,as will my participation in buyers strike.
Insane to see there are still some FOMO diehards out there, lower mortgage rates to only about 6 or 5.5 and they are willing to jump on massively overpriced house “because mortgage rate is lower” narrative…instead of looking at the actual value of the house itself. This is still pretty rampant mindset in SoCal unfortunately…oh well, on the other hand, at least it’s encouraging to see a slight uptick not back all time craziness again so perhaps majority do have some common sense or so priced out, the small reduction (not going bac to 3%) forced their hands..
Let’s take a vote. Which of the following investors do you think will do better? E.g. reach $1M net worth sooner?
1) Has $100k. Puts it all down on a $750,000 2,700sf tract home built in 2006. Mortgage rate: 6.4%. Mortgage payment: $4700/mo. Insurance: $200. Invests all savings into a 60/40 portfolio in their 401k.
2) Has $100k. Rents an apartment for $2500/mo. Pays no interest, PMI, or insurance. Invests all savings into ex-US stocks (VXUS), Eurobonds, yen bonds, Aussie bonds, and precious metals, maxing out IRA’s.