After a slow start to the year, the housing market is beginning to show some encouraging signs for buyers. According to the latest report from the National Association of REALTORS®, existing-home sales saw a slight increase in February as improving affordability and lower mortgage rates started bringing buyers back into the market.
Existing-Home Sales Edge Up
Existing-home sales—which include single-family homes, townhomes, condos, and co-ops—rose 1.7% in February compared to January. While sales are still 1.4% lower than they were a year ago, the increase is a positive signal as the spring homebuying season approaches.
One of the biggest factors helping buyers right now is lower mortgage rates. Rates have dropped from around 7% earlier in the year to about 6%, which can make a meaningful difference in monthly payments. In fact, that 1% drop could save buyers roughly $2,000 per year on mortgage costs.
More Buyers May Now Qualify
Lower rates are also expanding the pool of eligible buyers. Data suggests that a 1% decline in mortgage rates could allow about 5.5 million additional households to qualify for a mortgage, including approximately 1.6 million renters who could potentially become first-time homebuyers.
That shift may already be happening. First-time buyers accounted for 34% of purchases in February, up from 31% at the same time last year.
Housing Affordability Is Improving
Another factor helping buyers is that wage growth is currently outpacing home price growth by nearly four percentage points. Combined with lower mortgage rates, this is helping ease affordability pressures that many buyers faced over the past few years.
Home prices are also showing signs of stabilizing. The median existing-home price in February was $398,000, which is only 0.3% higher than a year ago. This slower pace of price growth may help more buyers enter the market.
More Inventory Is Slowly Returning
Housing inventory is also gradually improving. The number of homes for sale increased 2.4% from January and about 5% compared to last year, giving buyers more options than they had during the tight inventory conditions of recent years.
At the same time, homes are staying on the market slightly longer. The median time a home spent on the market was 47 days in February, compared to 42 days a year ago. This gives buyers a little more time to make decisions and potentially negotiate.
Buyers May Have More Negotiating Power
While competition still exists, buyers may find themselves in a better negotiating position than they were a year ago. About 14% of homes sold above asking price in February, down from 21% last year. Some sellers are also making price adjustments to attract buyers as the market shifts.
However, competition remains—especially from cash buyers. All-cash purchases accounted for 31% of sales in February, highlighting the continued presence of investors and equity-rich buyers in the market.
What This Means for the Spring Market
Although the housing market hasn’t fully returned to pre-pandemic levels of activity, the overall outlook is improving. Lower mortgage rates, moderating price growth, and increasing inventory are creating a more balanced environment for buyers and sellers alike.
As we head into the spring market—the busiest time of year for real estate—these trends suggest that more buyers may re-enter the market as affordability continues to improve.
For both buyers and sellers, staying informed about market conditions will be key to making confident decisions in the months ahead.
Read more from the National Association of Realtors HERE.
