What happened: In March, the seasonally adjusted annual rate of existing home sales slumped to 4.01M – even as mortgage rates inched lower leading into the month. While that may look like a small move, it reinforces the persistent hesitancy among would-be buyers.
Rates flirted with 7% in late January and early February but dropped to early-2024 levels into March as broader economic uncertainty has shifted market expectations. That should have translated to a modest bump in demand – but it hasn’t yet. Instead, the combination of rising inventory and falling sales, suggests a deeper buyer-side caution is taking hold. Many are waiting – not just for rate relief, but for more meaningful price adjustments.
The pullback in existing home sales contrasts with the relative surge in new home sales. One major distinction: builders are cutting prices more aggressively than existing home sellers. The price of existing homes sold remained higher than a year ago, while for new homes the median sale price was down 7.5% year-on-year in March – and sales were up 6.0%. Modest mortgage rate relief heading into the month was not enough to reignite momentum among existing homebuyers. Homeowners seeking high prices were met with a cooling market, leading to a buildup of inventory.
Unless sellers adjust pricing expectations more in line with new build competition–or we see a more significant drop in mortgage rates – expect choppy, sideways movement through spring. Zillow now expects 4.20 million existing home sales in 2025, as measured by NAR, a 3.3% gain from 2024.
Today’s NAR existing home sales release came in exactly in line with the 5.9% drop in sales predicted by Zillow’s formal forecasting models, which leverages mortgage rate modeling and a suite of leading indicators such as Zillow’s existing sales count estimates, inventory, pending home sales, and pricing signals.