April 24, 2025
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Existing home sales fell 5.9% in March to 4,020 thousand after having risen 4.4% in February. Our expectation is that a steady increase in jobs will boost income, mortgage rates will edge lower in the months ahead, and prices should be about stable or perhaps decline. As a result we expect home sales to pick up somewhat during 2025.
Lawrence Yun, NAR chief economist said that, “Home buying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates. Residential housing mobility, currently at historical lows, signals the troublesome possibility of less economic mobility for society.”
Mortgage rates are currently 6.8%. We believe inflation will be about unchanged in the months ahead which should allow mortgage rates to decline slightly to perhaps 5.5% by yearend.
The average home sat on the market for36 days in March compared to 42 days in February. It has been creeping upwards in recent months although 36 days is still a relatively short time period by any historical standard. A decade ago homes would routinely sit on the market for 3 months or so. Having said that, the steady increase appears to represent some weakening of demand.
There are still few homes available for sale. There was a 4.0 month supply of homes available in February That is short of the 5.0 month supply that is required to balance the demand for and supply of homes. The actual number of homes available had been steadily rising in recent months and has increased 19.8% in the past year. Eventually it will get back to the desired 5.0 month supply which is the point at where demand is roughly in line with supply but that may not happen in 2025.
.The shortage of homes available for sale is preventing a sharp drop in home prices. Home prices rose 1.7% in March to $403,700 after having risen 0.9% in February. The year-over-year change is now 2.7%.
Housing affordability is currently at 102 which means that potential home buyers have 2.0% more income than required to purchase a median-priced home. Many first time home buyers have been priced out of the market. But if mortgage rates decline slightly, job gains boost consumer income, and home prices are fairly steady (or decline), housing affordability should climb and the median-income earning family will have about 10% more income than required to purchase a median-priced home by the end of 2025.
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Given all of the above we expect existing home sales to rise about 2.0% in 2025 to 4,380 thousand..
We expect GDP to rise 0.5% growth in the first quarter and 2.0% in 2025.
Stephen Slifer
NumberNomics
Charleston, S.C.
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