U.S. Existing Home Sales (February 2025)

U.S. existing home sales unexpectedly improve in February 

• Existing home sales rose 4.2% month-on-month (m/m) to 4.26 million units (annualized) in February. This was considerably better than market expectations, which called for a decline to 3.95 million. Sales were down 1.2% from February 2024. Unadjusted sales were down 5.2% year-on-year. 
• The increase was entirely driven by the single-family segment, where sales rose 5.7% m/m – more than making up for the 5.2% decline the month prior. Sales in the smaller condo/co-op segment fell a sharp 9.8% m/m in February, following a flat print the month prior. 
• Activity was mixed on a regional basis. Sales rose 13.3% in the West (after falling 7.4% in January) and 4.4% in the South (after a 6.2% decline in the month prior). On the other hand, sales in the Midwest were flat for the fourth month in a row, and fell 2% in the Northeast.  
• Total housing inventory at the end of February was 1.24 million units, up 5.1% from January and 17% from one year ago (1.06 million). Measured at the current sales rate and seasonally adjusting, unsold inventory sat at 3.8 months' supply – down slightly from 3.9 months in January, but up from 3.3 months in February 2024. 
• House price growth marked a modest deceleration in February, with year-on-year gains easing to 3.8% from 3.9% in the month prior. On a seasonally adjusted basis, median home prices rose 0.2% m/m, following some pullback in the month prior (seasonal adjustment performed by TD Economics).

Key Implications

• This was a welcome surprise, but we caution to take last month's gain with a grain of salt. There are indications that weather was a factor in the recent sales swings. In January, activity fell sharply in the West and South, with these regions impacted respectively by winter storms and the Los Angeles wildfires. As such, rather than being an indication of a notable improvement in market conditions, the sharp increases in these regions in February may represent a rebound from the weakness at the start year. Smoothing through recent volatility, total sales trended a bit lower from the end of 2024. Fundamentally, little has changed, with affordability still stretched and overall sales still at low levels compared to historical norms.
• Mortgage rates resumed a moderate pullback in late February, the fruits of which should begin to be felt in short order. The positive theme will have a chance to become more engrained as the year unfolds, with the Fed indicating at yesterday's meeting that it still intends to resume rate cuts later this year. But while interest rates have been the only game in town for a while, new factors could emerge to play a more central role in shaping housing activity. In particular, the uncertainty surrounding trade conflicts and the risks that these pose on inflation and the overall economic outlook (see here), will bear careful watching in the month ahead, with the U.S. slated to ramp up tariffs on April 2nd. 

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