February Home Sales Likely Held Back by Wintry Weather, Rising Rates, Limited Listings

• Zillow expects existing home sales to increase 0.7 percent in February from January, rising to 5.42 million units at a seasonally adjusted annual rate (SAAR).
• New home sales should increase 9.2 percent month-over-month after a disappointing January, to 647,000 units (SAAR).

Persistently and relentlessly tight inventory, rising mortgage interest rates and a series of nasty winter storms likely combined to keep February home sales activity muted, especially sales of existing homes.

Existing home sales started 2018 with a whimper, posting a disappointing 5.38 million sales at a seasonally adjusted annual rate (SAAR) in January, the second month in a row in which sales levels widely disappointed relative to expectations. For three years, inventory of existing homes has been steadily declining, and – coupled with steadily rising mortgage interest rates at the start of this year – existing sales appear to be plateauing. February snowstorms across much of the Northeast and upper Midwest certainly did not help, and likely added to the headwinds.

In February, we expect existing home sales to edge higher from January – albeit from a low base – but remain below last year’s levels, rising 0.7 percent month-over-month but falling 0.9 percent from last February, to 5.42 million units (SAAR). The National Association of Realtors (NAR) will report existing home sales on Wednesday, March 21.

New home sales are also facing headwinds from tight supply, in combination with rising labor and materials prices. Nonetheless, after a disappointing January, we expect new home sales to rebound 9.2 percent in February from January, and rise 6.7 percent from a year ago, to 647,000 units (SAAR). The strength will likely come from the Western United States, where demand is strongest and prices are rising fastest. The West was also largely spared from February’s wintry weather.