Key Points:
- National sales remain weak despite rising inventory, highlighting the importance of distinguishing between active listings and new listings.
- Across the top 75 markets, sales are strongly correlated with the flow of new listings.
- The outlook for new listings growth—and thus sales—will hinge on the tension between the mortgage rate lock-in effect and life events that bring owners to sell.
Nationally, existing-home sales remain sluggish as would-be buyers and sellers stay on the sidelines amid economic uncertainty and affordability challenges. A chronic undersupply of housing has long been one of the primary culprits -- you can’t buy what’s not for sale. However, inventory has increased this year, surpassing levels from one year ago by nearly 20 percent in July, though still well below pre-pandemic norms. At the same time, the number of new listings has ticked up only 5 percent compared to one year ago. While these national trends provide important context, real estate is ultimately local. The relationship between listings and sales varies across markets, and a closer look at the data reveals how supply and demand dynamics are interacting today.
"The pace of existing-home sales depends not just on how many homes are available, but on how many fresh opportunities enter the market."
The Inventory Bathtub
Understanding the difference between new and active listings is important to deciphering today’s housing market. Active inventory reflects the number of homes sitting on the market at any given point in time, but increases in active inventory don’t necessarily translate into rising sales. It may just signal that homes are taking longer to sell. New listings represent the fresh flow of supply entering the market and rising new listings are far more closely tied to increased sales activity. Rising new listings also signal greater confidence in the market — homeowners typically put their property up for sale when they feel more confident about both attracting buyers and finding a new home to purchase. A useful way to think about this is with the bathtub analogy — the water already in the tub represents active listings, or what’s available at a given moment, but it’s the water flowing in from the faucet, representing new listings, that creates activity and movement.
Across the top 75 U.S. markets1 , the relationship between new listings and closed sales is statistically significant and positive. More new supply coming online is associated with more sales taking place. However, the link between active inventory and sales is much weaker, reinforcing the idea that it’s the flow of new homes into the market, not just the level of inventory, that drives sales activity.
How Markets Line Up
By plotting year-over-year sales against year-over-year new listings across the top 75 markets and then splitting each axis at the average across those markets, four distinct quadrants emerge. The upper-right quadrant represents markets with both above-average new listings and above-average sales—the clearest sign that new supply is being absorbed by buyers. The lower-right quadrant captures where new listings are above average, but sales are lagging, suggesting supply is outpacing demand. The upper-left quadrant shows stronger-than-average sales despite fewer new listings, often reflecting particularly tight supply conditions. Finally, the lower-left quadrant reflects weaker conditions on both sides, with below-average new listings and below-average sales.
Notably, Midwest and Northeast markets are overrepresented in the “above-average sales” categories, with 68 percent of these markets falling into either the upper-right or upper-left quadrants. This concentration highlights how demand has held up relatively better in these regions, even as supply dynamics vary. In contrast, mostly Southern and Western metros fall into the lower-right quadrant, where new listings are flowing in, but buyers are slower to absorb them. Markets like El Paso, Texas and Stockton, Calif. illustrate how rising supply doesn’t always translate to stronger sales when affordability constraints or weaker demand weigh on buyers.
Why the Flow Matters
The close link between new listings and sales underscores a fundamental truth about the housing market—the pace of existing-home sales depends not just on how many homes are available, but on how many fresh opportunities enter the market. Active inventory can rise when homes linger unsold, but that doesn’t necessarily generate more sales. It’s the flow of new listings—the fresh supply coming in—that drives activity and keeps the market moving.
Looking ahead, the trajectory of new listings will hinge on two powerful forces. On one side, many existing owners remain locked in by historically low mortgage rates and are reluctant to part with financing they may never see again. On the other, life continues to happen—families grow, jobs change, and retirements prompt moves. These “life happens” events, alongside the gradual easing of the rate lock-in effect, will determine how much new supply enters the market and, in turn, how much sales activity recovers.
Ultimately, the future of housing activity will be shaped by the balance between these forces. If the mortgage rate lock-in effect continues to dominate, the flow of new listings—and therefore sales—will remain limited. But, as life events accumulate and owners gradually adjust, fresh supply will return to the market and sales activity will pick up.
July 2025 Existing-Home Sales Outlook Highlights
For the month of July, First American updated its Existing-Home Sales Outlook Report to show that:
- Existing-home sales for July are expected to decrease 0.2 percent from last month’s pace of sales, and decrease 1.4 percent compared with the pace of sales a year ago.
- The largest contributors to the projected monthly decrease in existing-home sales are slower household formation (-0.2 percent) and a stronger rate lock-in effect as measured by the lagged* spread between the prevailing market mortgage rate and the average rate for all outstanding mortgages (-0.1 percent).
*The spread is incorporated with a two-month lag in the Existing-Home Sales Outlook model.
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] Inventory data is from Zillow. The 75 top markets does not include Dayton, Ohio but instead includes Stockon, Calif.
