Will sales of existing homes continue to rise?

With all the recent negative press about demand, how have existing home sales grown? We were told that lower mortgage rates would not positively impact demand. However, if you follow the forward-looking indicators, it could explain this uptick in demand.

First, we need to put context on the upturn: We’re working from all-time lows in home sales, so any small, tiny change in purchasing application data could see sales rise from here. Purchase request data over the past eleven weeks was slightly positive, with six positive and five negative prints. However, the bigger increase in demand came in June, when we had three straight weeks of positive application data prints.

That’s all that happened here, nothing more than that. However, let’s look at the entire report for clues about what’s happening today. The charts below show the critical data lines in the report.

By NAR: Total sale of existing homes – completed transactions including single-family homes, townhomes, condominiums and co-ops – increased 1.3% from June to a seasonally adjusted annual rate of 3.95 million in July. On an annual basis, sales decreased by 2.5% (vs. 4.05 million in July 2023).

In today’s report, we saw a slight increase in demand, which should not have been a surprise as upcoming home sales showed a surprising estimate last month. When people expected a negative print, they got a positive print. But let’s be honest: Current home sales numbers were operating from all-time lows before that period. I don’t see anything in our Housing Market Tracker data that would justify big gains in future home sales. However, the last two years have shown that sales haven’t really dropped much below the 4 million level after 1996.

From NAR: The total housing stock recorded at the end of July was 1.33 million units, up 0.8% from June and 19.8% from a year ago (1.11 million).

The stock is growing annually and we are getting closer to a level where I can feel good about it via the NAR data, which is different from ours Altos Research facts. If inventory can fluctuate between 1.52 and 1.93 million with at least four months of supply, all my low inventory talk will disappear. Historically, going back decades, active stock has traditionally been between 2 and 2.5 million. The housing bubble peaked at 4 million in 2007, so at our current level of 1.33 million we are not yet back to normal.

NAR: Starters were responsible for 29% of turnover in July; Individual investors bought 13% of the homes; Cash sales accounted for 27% of transactions; Distressed sales represented 1% of sales; Properties typically remained on the market for 24 days.

One of the reasons I’m happier with the 2024 housing data is that inventory is growing and the number of days on market is increasing year over year. Last year at this time of year we were at 20 days, and today we are at 24 days. Nothing good happens in the housing market if the days on market are 19 days or less – that would mean we’re going to have a huge boom in credit sales, or we simply won’t have enough homes available. There are just too many people looking for too few homes.

Overall, the existing home sales report came in as I expected; the only data line that disappointed me was that the monthly supply data dropped from 4.1 months to 4.0 months. For the past two years, monthly supply levels have peaked around October, so if we were to peak in June this year it would be a departure from recent norms. However, I encourage everyone to keep an eye on the tracker data and we will collect all the housing and economic data one day at a time.