Sales of previously owned US homes unexpectedly rose in February and the prior month was revised up, helped by a decline in mortgage rates and modest growth in asking prices.

Contract closings increased 1.7% to a 4.09 million annualized rate, according to National Association of Realtors data released Tuesday. The pace exceeded nearly all estimates in a Bloomberg survey of economists.

READ MORE: Purchase locks jumped as rates dipped in February

One emerging bright spot for the housing market is improving affordability, with mortgage rates receding recently along with price growth. The NAR's monthly housing affordability gauge, which reflects changes in home prices, median income and borrowing costs, stands at the most-favorable reading since 2022.

"Housing affordability is improving, and consumers are responding," NAR Chief Economist Lawrence Yun said in a statement. "Still, there is a long way to go to return to pre-pandemic levels of transaction activity."

The NAR report showed the median selling price rose 0.3% from a year earlier — one of the smallest advances since the pandemic housing frenzy — to $398,000 last month. The inventory of previously owned homes increased 4.9% from a year ago to 1.29 million — the most for any February since 2020. 

US Regions

Contract signings rose in three of four US regions, led by a more than 8% jump in the West to a one-year high. Sales climbed 1.6% in the South and edged up in the Midwest, but fell in the Northeast to the lowest since 2024. 

First-time buyers represented 34% of purchasers in February, up from 31% in the prior month and a year ago. Yun said on a call with reporters that the pickup suggests first-time buyers are taking advantage of improving affordability.

READ MORE: Why ARMs are rising even as rates drift lower

Market analysts see home sales climbing this year, with estimates ranging from 1.7% to 14%, according to a survey by Bloomberg late last year. Mortgage rates fell at the end of last month to 6.09%, the lowest since 2022. President Donald Trump asked Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities to help lower home-financing costs.

The Trump administration is attempting to invigorate the housing market with a series of initiatives, as affordability is poised to be a defining issue in the midterm elections. Trump is also asking Congress to ban institutional investors from purchasing single-family homes.