Key Points:

• Existing-home sales are projected to end 2024 higher than one year ago.
  
  
• Housing supply has increased in 34 of the top 50 markets we track on a year-over-year basis.
  
  
• Our analysis suggests a strong and positive relationship between increasing new listings and improving sales.

Despite a year marked by elevated interest rates and the persistent rate lock-in effect, the housing market is showing signs of mild recovery. Our latest Existing-Home Sales Outlook Report indicates that existing-home sales are projected to conclude 2024 slightly above 4 million annualized sales, surpassing December 2023 levels, but still trailing historical norms. The year-over-year increase is partly attributed to an increase in inventory. Nationally, for-sale inventory¹ is 19 percent higher than one year ago but remains nearly 26 percent lower than pre-pandemic, November 2019 levels. New listings² in November were just 0.5 percent higher than a year ago, and 16.3 percent lower compared to November 2019. However, real estate is local and it’s important to note that the growth in listings has not been uniform across the country. Moreover, not all housing inventory is created equal.

“As new listings increase, buyers can more easily find a home better than what they already own and that increases transactions.”

What’s Inventory Got to Do With It?

One unique factor about the housing market is that the seller and the buyer are, in many cases, the same – the existing homeowner. In order to buy a new home, you have to sell the home you already own, and then find a home to buy, but not just any home – one that you like better. The fewer homes there are for sale, the harder it becomes to find a home better than what you already own. Therefore, a lack of inventory doesn’t just prevent first-time home buyers from jumping into the market, but it also keeps existing homeowners staying put and limits existing-home sales. The opposite is also true. 

According to Zillow’s new listings metric, housing supply has increased in 34 of the top 50 markets we track on a year-over-year basis. Using the U.S. Census Bureau’s definition of the four U.S. regions, the strongest growth in new listings is in Southern and Western markets, and more muted improvements occurred in the Northeast and Midwest. 

The scatterplot below of the top 50 markets is divided into four quadrants, with the y-axis representing annual new listing growth and the x-axis representing annual home sales growth³ . The chart suggests a strong and positive relationship between increasing growth in new listings and improving sales – the more new listings, the more sales. There is also a relationship between sales growth and active inventory growth across the top 50 markets, but it’s weak. In some cases, higher active inventory levels may be the result of properties lingering unsold due to factors like overpricing, poor condition, or decreased buyer demand. Indeed, rising active inventory may mean demand has cooled, and homes are taking longer to sell, not because of a surge in new listings. An increase in the growth rate of new listings, on the other hand, directly enhances the options available to potential buyers, helping drive market activity. 

In November, housing supply as measured by growth in new listings increased more than the top-50 market average in 28 markets (top right two quadrants), while sales improved more than average in 27 of the top 50 markets (right two quadrants). Sales and supply improved by more than their respective averages for 21 markets (top right quadrant). In Seattle, for example, new listings jumped nearly 13 percent on annual basis in November and sales improved annually by 31 percent. In New York, on the other hand, new listings were down 4 percent compared to a year ago while sales fell 9 percent. 

More Homes, More Sales

Ultimately, whether rising levels of home inventory result in more sales depends on the cause of the increased inventory. Market activity is more likely to pick up when homes are priced right and located in desirable areas, rather than when overpriced homes flood the market. If home prices remain higher, buyers may still hesitate to act unless mortgage rates come down. Affordability, after all, is a paycheck-to-payment calculation, and the numbers need to work, whether that’s achieved through lower home prices, lower mortgage rates, or higher incomes. Nevertheless, our analysis shows that as new listings increase, buyers can more easily find a home better than what they already own and that increases transactions. 

December 2024 Existing-Home Sales Outlook Highlights

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

• Existing-home sales for December are expected to increase 0.3 percent from November’s pace of sales, and increase 2.8 percent compared with the predicted pace of sales a year ago.
  
  
• The largest contributors to the projected monthly increase in existing-home sales are positive economic growth (+0.2 percentage points), an easing of credit conditions (+0.1 percentage points), and higher house-buying power (+0.1 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.

^[1] Zillow’s for-sale inventory is the county of unique listings that were active at any time in a given month.

^[2] Zillow’s new inventory indicates how many new listings have come on the market in a given month.

^[3] Zillow’s Sales Count Nowcast is the estimated number of unique properties that sold during the month after accounting for the latency between when sales occur and when they are reported.