With the continuing desert of official data, the NAR’s existing home sales report - which normally is of secondary importance - temporarily becomes our best look at the housing market. 

To repeat what I’ve mentioned an number of times in the past, after the Fed began hiking rates in 2022, mortgage rates also rapidly rose from 3% to the 6%-7% range, where they have remained ever since. Since sales follow mortgage interest rates, existing home sales rapidly declined to 4.0 million annualized, and have remained in that range, generally +/-0.20 million for the past 3.5+ years - and they did so again this month:

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In September, sales came in at 4.06 Million annualized (blue, right scale), a mere 6,000 annualized above August’s rate. As of our last look one month ago, new home sales (gray, left scale) similarly declined and have similarly stabilized in the 625,000-725,000 annualized range. 

In the past several years I have been looking for the new and existing homes markets to rebalance. Existing home inventory has been removed from the market for over 10 years (likely due in part to absentee rental owners buying increasing chunks of inventory), and really accelerated during the pandemic. This caused an acute shortage of houses for sale, which in turn led to bidding wars among buyers and a spike in prices.

A rebalancing of the market more than anything would require an increase in inventory at least to pre-COVID levels, and a deceleration of price increases, or even outright decreases. Which means that the level of sales themselves was far less important than what the median price for an existing home and inventory are telling us about the ongoing rebalancing of the housing market.

The secular decline in inventory reached a nadir in 2022. This series is not seasonally adjusted, so it must be looked at YoY. In September inventory crept up by 5,000 to 1.550 million, exceeding its 2020 level for the same month by 9,000:

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Inventory was typically in the 1.7 million to 1.9 million range before the pandemic, which means that the chronic shortage still exists.

But even more important is what happened, and has continued to happen, with prices. As shown in the below graph, the average price of a new home (gray, left scale, not seasonally adjusted) rose almost 40% between June 2019 and June 2022 before slowly declining about -7% through June 2025. Meanwhile, the average price of an existing home (blue, right scale, not seasonally adjusted) rose about 45% between July 2019 and July 2022 and another 5% through July of this year, as was reported last Monet:

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With seasonal adjustments are not made, my rule of thumb is that a peak (or trough) occurs when the YoY% change is less than half of its maximum change in the past 12 months. Here are the comparisons in the past 12 months:

September 2.9%

October 4.0%

November 4.7%

December 6.0%

January 4.8%

February 3.6%

March 2.7%

April 1.8%

May 1.3%

June 2.0%

July 0.2%

August 2.2%

September 2.1%

While YoY price increases have crept up since July, they remain well below their past 12 month peak of 6.0%, so it is fair to conclude that, if we could seasonally adjust, house prices are softer than they were last winter and spring.

With softened prices and increasing inventory on a YoY and even 5 years basis, the rebalancing of the housing market appears well underway. Still, with prices of existing homes up about 50% from their pre-pandemic levels, there is still some distance to go.

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