• Zillow expects existing home sales to fall 3.5 percent in February from January, to 5.49 million units at a seasonally adjusted annual rate (SAAR).
• New home sales should rise 1.5 percent from January, to 563,000 units (SAAR).

Zillow’s February home sales forecast calls for data released this week to show once again that demand from home buyers remains strong as the market moves toward peak home shopping season.

Zillow expects February existing home sales, as reported March 22 by the National Association of Realtors, to total 5.49 million units at a seasonally adjusted annual rate (SAAR), down 3.6 percent from a strong January, but still well above a year ago (figure 1).

Tight for-sale inventory should be weighing on transactions, but existing home sales nevertheless beat the consensus forecast in four out of the past five months – the exception being December 2016, when unseasonably cold weather kept shoppers indoors – with the average upside surprise in the range of 125,000 units (SAAR).[1] While some of this may be attributable to shifting seasonal patterns, or to homes selling more quickly, it also doubtlessly signals a market with still-substantial pent-up demand.

We expect February new home sales reported by Census Bureau on March 23 to edge modestly higher, rising 1.5 percent to 563,000 units (SAAR) (figure 2). It would be the second consecutive increase after sales of new homes dropped steadily throughout the second half of 2016.

Over the longer horizon, we expect existing home sales to rise 12 percent to 5.82 million units (SAAR) for the year ending February 2018, and new home sales to rise 16 percent to 609,000 units (SAAR) over the same period.

[1] The average surprise – the difference between the forecast and NAR’s initially reported sales numbers – in these four months is slightly smaller for Zillow’s forecast: 122,400 versus 124,500 for the consensus forecast.