Sales of previously owned homes rose in February 2025, bringing new optimism to a housing market that has faced challenges in recent years. According to the National Association of Realtors (NAR), existing home sales increased by 4.2% from January 2025, reaching an annualized rate of 4.26 million units. While this marks a welcome increase, it’s essential to note that sales remain 1.2% lower than figures recorded in February 2024, indicating a mixed bag of signals for potential homebuyers.
The amount is particularly telling as analysts had anticipated a decline of 3%, further highlighting the upward momentum in housing activity against a backdrop of easing mortgage rates. The latest average rate on a 30-year mortgage, as reported by Freddie Mac, was 6.65% by March 13, 2025, reflecting a slight decline from earlier highs but still significantly above the historical lows of just over 2% seen a few years ago.
“Home buyers are slowly entering the market,” stated Lawrence Yun, NAR’s chief economist. He emphasized that while mortgage rates have not fluctuated dramatically, an increase in inventory is helping to meet pent-up housing demand. Homes, on average, are selling after 42 days on the market, lengthening slightly from January. In February 2024, homes typically sold after just 38 days.
Despite the rise in sales, the current housing inventory still reveals significant constraints. At the end of February 2025, there were 1.24 million unsold homes available, a 5.1% increase from the prior month, but translating to just a 3.5-month supply at current sales levels. Experts consider a balanced market to have a supply of about 5 to 6 months.
“We are still in a relatively tight market condition,” Yun explained, voicing concerns over the continuing affordability challenges facing many prospective homeowners. The pressure on prices remains as the national median sales price for existing homes hit $398,400 in February 2025, marking a 3.8% increase compared to the same month last year. This hike in prices represents the 20th consecutive month of annual increases.
Breaking down sales figures, first-time buyers represented a notable 31% of all sales in February, up from 28% in January and 26% in February 2024. This signals a cautious confidence among new buyers entering the market despite the heightened costs associated with home purchases and mortgage rates.
Meanwhile, all-cash sales made up 32% of transactions last month, showing a slight increase from 29% in January 2025, suggesting that buyers capable of making cash offers are seizing the opportunity amid the increased inventory. However, sales to investors fell to 16% in February, down from 21% in the previous year.
In light of these figures, the outlook appears mixed. While rising home prices and mortgage rates have stymied some would-be buyers, the demand from first-time buyers and cash-paying purchasers indicates segments of the market that are responding favorably. However, a recent survey indicated that many agents believe the current resale market is weaker than normal.
According to the monthly REALTORS Confidence Index by John Burns Research and Consulting, 53% of agents reported weaker than normal sales as opposed to a year ago. This percent reflects a decrease since January, where the number was at 47%, but still indicates that affordability constraints and economic uncertainty are keeping many potential buyers on the sidelines.
The National Association of Realtors continues to emphasize the importance of greater housing inventory. Yun remarked that 30% more homes are needed on the market to achieve a balanced environment where buyers and sellers can negotiate more effectively.
As we approach spring, the traditional peak buying season, increased inventory is expected to further benefit buyers looking to find a new home. While current conditions present challenges, they also highlight the resilience of the housing market and the various factors influencing buyer behavior.
Market analysts are keeping a close watch on trends in mortgage rates, which play a critical role in shaping homebuyer activity. As rates remain relatively stable in the high 6% range, potential buyers may find more viable opportunities to engage in the housing market.
Despite the ongoing challenges, recent trends suggest that there is cautious optimism surrounding home sales as seasonally adjusted annual figures pointed toward a longer-term recovery in a market that has grappled with unprecedented fluctuations in pricing and demand over the past couple of years. The interplay of higher inventory levels, varying mortgage rates, and first-time buyers returning to the market may pave the way toward increased activity as we head deeper into 2025.
Ultimately, as the data unfolds, the housing market continues to adapt to economic pressures, creating evolving opportunities and challenges for homebuyers across the United States.
