Existing Home Sales

What Are Existing Home Sales?

Existing home sales is a monthly report from the National Association of Realtors (NAR) measuring the annualized number of completed sales of previously owned residential properties, including single-family homes, condominiums, townhomes, and co-ops. It is the broadest measure of U.S. housing market activity and a key indicator of consumer confidence and economic health.

The data is reported as a seasonally adjusted annual rate (SAAR), representing the pace of sales if the current month's volume were sustained for a full year. The report also includes data on median and average sale prices, inventory levels, and days on market.

Why It Matters for Markets

Existing home sales serve as a real-time gauge of housing market health and a barometer of monetary policy's impact on the economy. Because housing is the most interest-rate-sensitive sector, existing sales are among the first indicators to respond to changes in mortgage rates, providing early feedback on whether Fed policy is achieving its intended effect.

The "months of supply" metric (inventory divided by the monthly sales pace) is particularly important. Six months of supply is generally considered a balanced market. Below four months suggests a seller's market with upward price pressure. Above eight months suggests a buyer's market with potential price declines. This metric directly influences home price trends and homebuilder decisions.

For equity investors, existing home sales data affects a wide range of sectors beyond homebuilders: mortgage lenders, title insurance companies, home improvement retailers, furniture manufacturers, and moving companies all see revenue affected by the pace of home transactions.

The Affordability Constraint

The dominant theme in recent housing market analysis is affordability. The combination of high home prices (which appreciated significantly during the pandemic housing boom) and elevated mortgage rates has reduced affordability to levels not seen since the early 1980s. This has suppressed existing sales volumes and created a "frozen" market where neither buyers nor sellers are willing to transact at current conditions.

The "lock-in effect" (existing homeowners unwilling to give up low-rate mortgages) has reduced inventory to historic lows, supporting prices even as sales volumes decline. This unusual dynamic, low sales but stable or rising prices, differs from typical housing downturns where both volume and prices decline together.