Lawrence Yun, chief economist for the Realtors, tells CNBC, "Consumers are very sensitive to mortgage rates, at least that's what we are finding out. So as mortgage rate began to drop, there was evidently a strong pent-up demand." However, sales were down 1.8 percent annually in February, due to the relatively higher rates. Supply conditions were better this February over the last, gaining 3.2 percent year-over-year, and home price growth was the smallest annual gain in years, 3.6 percent.
Now, observers wonder whether renewed demand will cause home prices to heat up again. So far, they haven't because builders are barely ramping up their single-family construction, especially on the lower end of the market. Existing home sales were still depressed at the entry level, down nearly 11 percent annually for homes priced below $100,000. Even sales of homes priced between $100,000 and $250,000 were flat.
One big change is that sales of higher-end homes that had been seeing strong gains last year were down more than 6 percent in February. That may be due to changes in the tax code that take away deductions on pricier homes.