• Zillow expects November existing home sales to fall by up to roughly 1.7 percent, to 5.17 million units (SAAR).
• Steady projected income growth and a lower 30-year fixed mortgage rate will likely not be enough to overcome rising homeowner vacancies and falling homeownership rates.

Zillow expects Monday’s November existing home sales data from the National Association of Realtors (NAR) to show a decline of about 1.7 percent, to a seasonally adjusted annual rate (SAAR) of 5.17 million units, down from 5.26 million units in October.

Background

Existing home sales have been moving up in recent months, including a 1.5 percent increase in October. Sales had been slowly but steadily increasing since late 2010, before dropping sharply last summer. They recovered somewhat this spring and summer, regaining about two-thirds of the decline recorded between July 2013 and March 2014, before falling unexpectedly in August. We expect them to fall again in November.

Forecast

Our existing home sales forecast uses two models, a structural model and a historical model. Both models point toward lower home sales in November, although the structural model suggests a smaller decline.

Steady projected income growth and further declines in the 30-year fixed mortgage interest rate appear not to be enough to overcome the tides of rising homeowner vacancies and falling homeownership rates. Rising prices could also be a roadblock to higher sales.

Under some reasonable scenarios, the expected decline could be slightly smaller. If the only significant change is that the homeowner vacancy rate continues its recent upward movement, existing home sales could fall just 1.1 percent from October, to 5.2 million units (SAAR). If only the homeownership rate changes significantly, and continues to decline at a pace consistent with the past year, home sales could fall to 5.19 million units (SAAR), a decline of about 1.3 percent. If both of these changes come to pass, home sales could to 5.18 million units (SAAR), a 1.4 percent decline.

All of these scenarios suggest a smaller decline in home sales than that predicted by the historical model. That model suggests a decline of 1.7 percent to 5.17 million units (SAAR). In recent months the historical model has tended to be slightly more accurate than the structural model so we are inclined to place greater emphasis on its results.

More details about the assumptions underlying this month’s forecast can be found here.