February Home Sales Surge to Three-Year High

Homes sales are picking up as inventory constraints ease slightly.

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Sales of previously-owned homes rose again in February, providing further evidence that the housing recovery continues to flourish amid a strengthening labor market, an industry report showed Thursday.

Total existing-home sales in February were more than 10 percent above levels recorded this time last year according to the National Association of Realtors, making February sales numbers the highest since the tax credit expired in November 2009.

"Job growth in the improving economy and pent-up demand are causing both home sales and rental leasing to rise," NAR Chief Economist Lawrence Yun said in a statement.

[READ: Housing Recovery Gains Ground]

But even though home prices are rising much faster than rents, record-low mortgage rates are still making home purchase affordable. Rates for 30-year fixed-rate mortgages averaged about 3.5 percent for the weekend ending Mar. 21, according Freddie Mac's Primary Mortgage Market Survey, reversing their course from the previous week and heading lower ahead of the spring homebuying season.

As of this week, rates have been below 4 percent for a year and are likely to remain that way for the foreseeable future, according to experts.

"Low and stable inflation is placing downward pressure on fixed mortgage rates," Frank Nothaft, vice president and chief economist at Freddie Mac, said in a release. "Our March Outlook calls for 30-year fixed mortgage rates to remain below 4 percent throughout this year."

Low mortgage rates might play a role in pushing more would-be homebuyers into making an offer, but it won't do much good if there's nothing on the market to buy. The inventory of homes for sale has been persistently tight for several months, which has constrained further growth in existing home sales according to experts.

[READ: Homebuilder Confidence Loses Ground in March]

"Tight inventory has been a critical issue for the housing market: the limited supply of homes has fueled bidding wars and has meant that buyers have little to choose from and agents have little to sell," Jed Kolko, chief economist at real estate information website Trulia, wrote in an email. "Inventory has been tightening because construction levels are still low, adding little new housing stock, and homeowners are waiting to sell until they have more positive equity."

But that dynamic could be changing. The total number of housing units for sale rose almost 10 percent as of the end of February according to NAR. While that's still more than 19 percent below levels recorded this time last year, it's the biggest monthly increase since December 2010—26 months ago.

"This year, inventory is likely to rise now through the summer because of seasonality, bringing some relief to buyers and helping boost sales activity," Kolko added. "The big seasonally-adjusted inventory increase in February is an early hint that the inventory crunch may finally be easing for good."

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