October 23, 2025
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Existing home sales rose 1.5% in September to 4,060 thousand after having declined 0.2% in August Our expectation is that a steady increase in jobs will boost income, mortgage rates will decline slowly in the months ahead, and prices should also decline slightly. As a result we expect home sales to pick up during the remainder of 2025 and throughout 2026.
Lawrence Yun, NAR chief economist said that, “As anticipated, falling mortgage rates are lifting home sales. Improving housing affordability is also contributing to the increase in sales.”
He added that,”Inventory is matching a five-year high, though it remains below pre-COVID levels. Many homeowners are financially comfortable, resulting in very few distressed properties and forced sales. Home prices continue to rise in most parts of the country, further contributing to overall household wealth.”
Mortgage rates are currently 6.3%. We believe inflation will decline slowly in the months ahead which should keep mortgage rates edging their way lower through the end of this year and throughout 2026 to 5.8% by the end of that year..
The average home sat on the market for 33 days in September compared to 31 days in August.. That is a relatively short time period by any historical standard. A decade ago homes would routinely sit on the market for 3 months or so.
There are still few homes available for sale but the inventory is increasing. There was a 4.6 month supply of homes available in September. That is still short of the 5.0 month supply that is required to balance the demand for and supply of homes. As mortgage rates decline more and more homeowners who have been reluctant to sell will put their houses on the back. Eventually it will soon get back to the desired 5.0 month supply which is the point at where demand is roughly in line with supply.
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The shortage of homes available for sale is preventing a sharp drop in home prices. Home prices fell 1.7% in September to $415,200 after declining 0.8% in August. Home prices are not adjusted for any seasonal movement. They tend to climb in the spring and reach a peak in June. Look for them to fall in each of the next five months or so. What really matters on a series like this is the year-over-year change which s now 2.1% and seems to be headed lower (see red line).
Housing affordability is dependent on three factors — home prices, mortgage rates, and consumer income. Jobs growth is climbing slowly which boosts consumer income, Mortgage rates are declining slowly. And home prices are also beginning to decline slowly. As a result, housing affordability should climb and the median-income earning family will have about 11% 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 8.5% in 2026 to 4,550 thousand by the end of that year.
GDP declined 0.6% in the first quarter and rose 3.8% in the second quarter. We expect a gain of 3.3% in the third quarter. That would produce 2.3% GDP growth in 2025 and we expect growth of 2.7% in 2026.
Stephen Slifer
NumberNomics
Charleston, S.C.
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