According to the National Association of Realtors, sales of homes that were previously owned fell 7.2% in February to an annual adjusted rate of 6.02 Million units.

Analysts had expected 6.13 million units. This was a significant miss. Comparing to the same month last year, sales were 2.4% lower. The underwhelming sales numbers were likely due to rising mortgage rates.

This sales figure is calculated based upon closings. It means that the homes were likely sold in December or January. Important to remember is that mortgage rates in December were very low with the 30-year fixed-rate loan at 3.25%. According to Mortgage News Daily, this rate was not uncommon. However, the rate started to increase steadily in January reaching 3.68% by month’s end. Now, it is at 4.5%.

Lawrence Yun is chief economist of the Realtors.

Rising rates may have had an impact on some sales, but the real problem in today’s housing market is the low supply. Although there were more properties on the market than in January, February saw a drop of 15.5%. There was still 870,000 houses for sale. That’s a close-to-an all-time low, as it represents a 1.7 month supply at the current pace.

Prices rose due to tight supply and high demand. A median sale price of an existing house in February was $357,000. This represents a 15 percent increase from the previous year.

This price is affected by both the number of properties currently on the market and the range in which sales are highest. The lower price range is the most popular. The number of houses priced between $100,000 to $250,000 decreased 26% over the previous year. The sales of homes between $750,000-$1 million rose 24%. The sales of homes above $1,000,000 soared 21%

There is fiercer competition for homes on the market. Within 18 days of each other, houses are under contract. Redfin agent Redfin received 68.6% national home offers that were submitted to the brokerage. This is according to a seasonally adjusted, new report. This was the highest number since Redfin started counting home offers in April 2020.

After rates spiked, bidding wars grew this year. This created a firestorm under buyers. Redfin’s chief economist Daryl Fairweather said that competition will plateau, or decline, if interest rates continue to rise as they have. Redfin’s chief economist Daryl Fairweather stated that monthly mortgage payments to new buyers have already reached a record. They are increasing and some buyers will leave.

Investors face stiff competition for regular homebuyers. Investors accounted for 19% in February’s sales.

Although there was a slight rise in January’s first-time buyer segment, they still tended to be looking at homes near the bottom of the market. However, this is well below the historic average around 40%. Buyers are now paying 28% less per month for the same house at current mortgage rates than they were a year ago due to higher prices.

Danielle Hale is chief economist for Realtor.com. “We anticipate that home sales in 2022 will be relatively high as homebuyers think creatively about how to allocate their housing budget, despite rising prices like energy and food. Although buyer activity is resilient to rising costs associated with homeownership so far, the extraordinary year will test it.