What happened: The National Association of Realtors existing home sales count increased in July. Despite the monthly increase, the pace of home sales is essentially flat – up just 0.8% – when compared to last year’s pace. Although fewer homes have come on the for-sale market, the total number of homes for sale increased again. That sustained increase in for-sale inventory is putting downward pressure on house prices. As price growth slows, Zillow forecasts the total value of housing transactions will increase 4.5% in 2025, down from the 7% increase in 2024.
Why it matters: Despite lower mortgage rates and a small improvement in housing affordability this year, existing home sales have remained relatively unchanged from year ago levels. Weak sales are likely the result of consumer finances that are increasingly under pressure along with a more sluggish labor market.
Economic uncertainty has been a major headwind this year. Inflation remains stubbornly elevated and employment growth has slowed just to 35,000 jobs per month on average in the past three months, a substantial downshift from 127,000 jobs in the preceding three month period.
Sales are expected to continue to bounce along the bottom — Zillow projects existing home sales measured by NAR to total 4.09 million in 2025, a significant downward revision from last month’s forecast of 4.16 million. This would represent a 0.6% increase from 2024.
While mortgage rates have been on a decline since May, mortgage rates aren’t expected to fall much further. Stretched housing affordability and a slowing economy are strong headwinds that hinder improvements in existing home sales.