In the housing market, the seller and the buyer are, in many cases, the same. To buy a new home, you must sell the home you already own. For several years, a persistent and historic lack of supply has restrained the housing market, but a recent uptick in inventory is poised to boost sales activity as the spring home-buying season peaks. 

Our Existing-Home Sales Outlook Report ‘nowcasts’ existing-home sales based on the historical relationship between sales, demographic trends, house-buying power, and the prevailing financial and economic conditions. Based on our nowcast, we expect April existing-home sales to rise by 0.7 percent compared with March but remain modestly lower than the actual annual pace of sales one year ago. 
 

“Higher inventory levels offer more choices for buyers and potential sellers alike, boosting market activity as participants find more options suited to their needs.”

More Inventory, More Sales 

According to fourth quarter 2023 data from the Federal Housing Finance Agency’s National Mortgage Database (NMDB), 87 percent of mortgaged homes have a rate below 6 percent. With mortgage rates hovering near 7 percent, the bulk of existing homeowners face a financial disincentive to sell their home – what’s known as the rate lock-in effect. The lock-in effect has moderated modestly since mortgage rates peaked in October 2023, but will continue to limit market potential until rates either decline sufficiently to free a substantial number of homeowners, or remain elevated long enough that a significant portion of borrowers lock into these higher rates. 

The good news is that, despite the lock-in effect, more homeowners are choosing to list their homes for sale than a year ago. According to data from Zillow, new listings in April increased 16 percent compared to the same month last year. While this figure is still 22 percent below the average number of new listings recorded in April during the years 2018, 2019, 2021, and 2022 – excluding 2020 due to peak pandemic conditions – the progress is a welcome development. Overall existing-home inventory in March was approximately 13 percent greater than a year ago.  

What’s Prompting Homeowners to Sell?

More inventory typically prompts more sales, but what could be motivating sellers to sell? While the majority of homeowners remain rate locked-in, the effect has diminished since hitting a peak in the final quarter of 2023, and sellers have un-anchored their expectations from the pandemic-low mortgage rates. Additionally, high levels of home equity could mitigate the impact of the rate lock-in effect. Homeowners have gained quite a bit of equity in their homes alongside growing house prices since the beginning of the pandemic. In inflation-adjusted dollars, homeowners had an average of $324,000 of equity at the end of 2023.

For some of those equity-rich homeowners, moving and taking on a higher interest rate isn’t a huge deal, especially if they’re moving to a more affordable home or market. Finally, an existing homeowner may choose to sell for lifestyle reasons, even if it means losing their low mortgage rate. Higher inventory levels offer more choices for buyers and potential sellers alike, boosting market activity as participants find more options suited to their needs. 

April 2024 Existing-Home Sales Outlook

For the month of April, First American updated its Existing-Home Sales Outlook to show that:

• Existing-home sales are expected to increase 0.7 percent from March’s pace of sales.
  
  
• Our projected April seasonally adjusted annualized rate is down 12 percent compared with the predicted pace of sales a year ago.
  
  
• The largest contributors to the projected monthly change are sales momentum (+1.1 percentage points), a boost in economic conditions (+0.1 percentage points), and greater credit availability (+0.08 percentage points).
  
  

Methodology

Our Existing-Home Sales Outlook Report ‘nowcasts’ existing-home sales, which include single-family homes, townhomes, condominiums, and co-ops on a seasonally adjusted annualized rate based on the historical relationship between existing-home sales, U.S. demographic trends, house-buying power, and the prevailing financial and economic conditions, as well as momentum, a weight assigned to past values. Please note that the Existing-Home Sales Outlook Report is based on assumptions about demographic, economic and financial conditions. Actual values may differ from those projected. Recent existing-home sales estimates are subject to revision to reflect the most up-to-date information available on the economy, housing market and financial conditions.