First American: Existing home sales remain subdued

Nationally, existing home sales remain muted even as housing inventory grows, according to a new First American analysis of the 75 largest U.S. metropolitan areas.

Inventory in July was nearly 20% higher than a year ago, yet the flow of new listings rose only 5% compared with 2024.

That distinction matters, said Odeta Kushi, deputy chief economist at First American.

“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,” she said. “New listings represent the fresh flow of supply entering the market and rising new listings are far more closely tied to increased sales activity.”

Kushi described the dynamic through a “bathtub” analogy; the water already in the tub is active inventory, while the faucet represents new listings. Activity happens when fresh supply flows in.

First American projects July sales will fall 0.2% from June and 1.4% from one year earlier. The main reasons for these declines are identified as reduced household formation and the ongoing impact of the mortgage rate lock-in effect.

Regional disparity

The data show clear regional divides. In Midwest and Northeast metros, 68% fell into categories where sales were above average, even if new listings were limited.

Southern and Western metros more often showed new supply entering the market without equivalent buyer demand, reflecting affordability pressures.

For example, in El Paso, Texas, and Stockton, Calif., new listings increased, but buyers were slower to absorb them.

In contrast, tighter supply in several Midwest cities has not prevented stronger sales.

A close link

Data shows that the pace of existing-home sales depends less on the stock of homes available and more on whether new options are entering the market.

Active inventory may climb simply because homes linger unsold, but that does not generate more transactions.

“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,” Kushi said.

Looking ahead

The outlook for new listings depends on two competing forces, Kushi said.

Many homeowners remain reluctant to sell because they are “locked in” by low mortgage rates secured before borrowing costs rose.

“If the mortgage rate lock-in effect continues to dominate, the flow of new listings, and therefore sales, will remain limited,” said Kushi. “But, as life events accumulate and owners gradually adjust, fresh supply will return to the market and sales activity will pick up.”