Key Points:

• Existing-home sales remain well below historical data would suggest for a market of today’s size.
  
  
• Active listings are still 22 percent lower than the 2015–2019 average, and the annual pace of improvement is slowing.
  
  
• Lower mortgage rates and improved affordability should encourage some buyers and discouraged sellers to re-enter the market.
  
  

The housing market remains stuck in a slump. If existing-home sales were keeping pace with the historical pre-pandemic average ratio of sales to households—our benchmark for a ’normal’ market—they would be running at an annualized rate of about 5.4 million sales. Instead, sales are hovering near 4 million, well below that historical norm. So, what’s holding the market back, and what could break the slump? Today’s housing market is caught between competing forces, some boosting the market, while others are impeding it.

“More inventory is essential to breaking the housing market slump—after all, you can’t buy what’s not for sale.”

What’s Restraining the Housing Market?

Financial disincentives and labor market dynamics are key obstacles preventing the housing market from a stronger recovery. Many homeowners refinanced during the pandemic and now enjoy ultra-low mortgage rates averaging 4.1 percent. With current rates near 6.3 percent, moving often means trading a low monthly payment for a much higher one, even if borrowing the same amount. This “rate lock-in” effect has frozen many would-be sellers in place, slowing the turnover of existing homes and prolonging the housing market’s slump.

The softening labor market is another drag on the housing market. While unemployment remains historically low, the job hiring rate has fallen to levels last seen in 2013, when unemployment was 7 percent. Job changes often trigger household moves, so when fewer people are switching jobs, there is less incentive to relocate, reducing both buying and selling activity. A softening labor market also fuels greater economic uncertainty, which discourages buyers and may prompt them to pull back from making the biggest financial decision of their lives.

Housing Supply Rebound Stalls 

There is some mixed news on the supply side. According to our analysis of Redfin data, inventory is higher than a year ago, giving buyers more options. However, the pace of inventory growth is slowing, and supply nationally remains tight by historical standards. In August, inventory was still 21 percent lower than the 2015–2019 average for the same month. That gap was smaller in July (17 percent) and June (15 percent), signaling that rebound in supply is stalling. Weekly data through September shows a deceleration in the year-over-year growth of both active and new listings, while elevated listing withdrawals, when sellers take their homes off the market, suggest hesitant sellers are waiting for better conditions. More inventory is essential to breaking the housing market slump—after all, you can’t buy what’s not for sale.

Will Improving Affordability Bust the Slump?

Mortgage rates recently hit an 11-month low, and purchase mortgage applications have responded positively. Slower home price growth combined with lower rates means affordability is gradually improving, opening the door for some sidelined buyers—and even triggering some sellers to re-enter the market.

The housing market hangs in a delicate balancing act. Lower rates and improving affordability are pulling buyers back in, but the rate lock-in effect, labor market dynamics, and cooling inventory growth continue to dampen home sales. Until these opposing forces swing further in favor of greater market activity, existing-home sales are likely to remain well below their historical ‘normal.’

August 2025 Existing-Home Sales Outlook Highlights

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

• Existing-home sales for August are expected to decrease modestly from last month’s pace of sales, but increase 2 percent compared with the pace of sales a year ago.
  
  
• The largest contributor to the projected monthly decrease in existing-home sales is slower household formation (-0.2 percent).

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.