Implications: Existing home sales continued to struggle in April, eking out a small gain but remaining near the lows of the past several years.  Looking at the big picture, sales remain at roughly the same pace as in the aftermath of the Great Financial Crisis and are well below the roughly 5.250 million annual pace pre-COVID (let alone the 6.500 million pace during COVID).  The main issue remains affordability which has taken a turn for the worse recently due to the war on Iran raising energy costs and having an upward impact on inflation.  The result has been a rapid increase in 30-year mortgage rates, which now sit around 6.4%. Higher inflation also takes further rate cuts from the Federal Reserve off the table for at least the near future. Buyers also face an ongoing headwind from tight inventories; the months’ supply of homes (how long it would take to sell existing inventory at the current very slow sales pace) was 4.4 in April, below the benchmark of 5.0 that the National Association of Realtors uses to denote a normal market.  Many existing homeowners also remain reluctant to sell due to a “mortgage lock-in” phenomenon, after buying or refinancing at much lower rates before 2022.  This means potential buyers will have to continue to deal with limited options.  Existing home sales also face significant competition from new homes, where in many cases developers are buying down mortgage rates to compete and move inventory. One piece of good news is that the median price of an existing home is up only 0.9% versus a year ago. Aggregate wage growth (hourly earnings plus hours worked) has been consistently outpacing median home price gains over the past year for the first time since 2023, which improves affordability. Considering these cross currents, and the fact that existing home sales have been stuck in low gear since the end of the COVID pandemic, we expect 2026 to likely be more of the same.

Click here for a PDF version