How bad is the housing market recession? Existing home sales are back to 1978 levels
How bad is the housing market recession? Existing home sales are back to 1978 levels
While U.S. home prices have held stable since mortgage rates spiked, existing home sales are a very different story. Here’s why.
Want more stories from Lance Lambert’s ResiClub in your inbox? Subscribe to the free, daily ResiClub newsletter.
The recession in the U.S. market for existing homes has been so deep that April sales were back to late-’70s levels—despite the population growth since that time, according to recent data from the National Association of Realtors:
April 1978: 4.09 million U.S. existing home sales
April 2024: 4.14 million U.S. existing home sales
1978: 223 million U.S. population
2024: 341 million U.S. population
The reason, of course, is that housing affordability has deteriorated so much that many buyers and sellers alike have pulled back from the market. Many homeowners who would otherwise like to sell and buy something else are staying put rather than trading in their 3% mortgage rate for a 7% mortgage rate.
In addition, according to a forecast published this week by Goldman Sachs, the recovery for existing home sales could be a slog.
Goldman Sachs projects that existing home sales will slowly drift up from 4.1 million in 2024 to 4.5 million in 2027. Not only is that far below the 6.1 million during the height of the pandemic housing boom in 2021, it’s also well below the 5.3 million U.S. existing home sales during “normal” times in 2019.
While this recession for existing home sales has coincided with pricing corrections in some pandemic boomtowns in parts of Texas and Colorado, many housing markets in the Northeast and Midwest where inventory has remained tight have continued to see rising home prices.
Additionally, the U.S. market for new homes has fared much better than the market for existing homes. There are two reasons for this:
- Single-family homebuilders don’t have a “lock-in effect”—they can continue to develop and build new homes.
- Homebuilders, where needed, have introduced affordability adjustments like outright home price cuts or mortgage rate buydowns to move product. Many sellers in the existing market have resisted coming down on price.
Goldman Sachs predicts the average 30-year fixed mortgage rate will fall to 6.5% by the end of 2024, and to 6.3% by the end of 2025.
And analysts at the investment bank forecast that U.S. home prices will rise 3.8% in 2024, followed by 4.4% in 2025.
ABOUT THE AUTHOR
(11)
