Existing Home Sales (Mar.) - Capital Economics
US Housing

Existing Home Sales (Mar.)

US Housing Market Data Response
Written by Sam Hall
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Tight inventory pushed existing home sales down to a seven-month low in March. Indeed, the number of homes for sale is at record lows and this will continue to constrain home sales this year. What’s more, with mortgage rates likely to rise to 4.0% by the end of the year, worsening affordability will weigh on demand. We therefore expect sales will fall further over the coming months, ending 2021 at around 5.6m annualised.

Home sales continue journey towards pre-COVID trend

  • Tight inventory pushed existing home sales down to a seven-month low in March. Indeed, the number of homes for sale is at record lows and this will continue to constrain home sales this year. What’s more, with mortgage rates likely to rise to 4.0% by the end of the year, worsening affordability will weigh on demand. We therefore expect sales will fall further over the coming months, ending 2021 at around 5.6m annualised.
  • Existing home sales fell by 3.7% m/m in March to 6.01m annualised. (See Chart 1.) Given that existing home sales are recorded at contract closing, we had expected to see the impact of severe winter weather in February feed through to March’s sales data. But with home sales falling by just 2.9% m/m in the South, compared to 8.0% m/m in the West, it seems that other factors were also behind last month’s decline.
  • We think that tight inventory was largely to blame for March’s decline and will continue to constrain home sales this year. At 1.14m after seasonal adjustment, the number of homes for sale is at record lows and down by 28% y/y. Admittedly, the shortage in homes for sale has created a backlog of households that are still planning to buy a home, which will support demand over the coming months.
  • But booming house prices are stretching affordability. And we expect affordability to worsen throughout the year as mortgage rates rise to 4.0% by end-2021. That will help bring home sales back towards its pre-COVID trend. Overall, we expect existing home sales will ease back over 2021, ending the year at around 5.6m annualised.

Chart 1: Existing Home Sales (S.Adj., 000s Ann.)

Source: NAR

Table 1: Existing Home Sales (Millions Annualised)

Mar-20

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan-21

Feb

March

Existing Home Sales

5.35

4.37

4.01

4.77

5.90

5.97

6.44

6.73

6.59

6.65

6.66

6.24

6.01

(%m/m)

-6.1

-18.3

-8.2

19.0

23.7

1.2

7.9

4.5

-2.1

0.9

0.2

-6.3

-3.7

Homes for Sale1

1.56

1.47

1.47

1.44

1.39

1.37

1.34

1.32

1.27

1.23

1.19

1.15

1.14

Months’ Supply1,2

3.5

4.0

4.4

3.6

2.8

2.8

2.5

2.3

2.3

2.2

2.1

2.2

2.3

Source: NAR. 1Seasaonally-adjusted by Capital Economics. 2Number of months it would take to sell all homes for sale at current pace of sales


Sam Hall, Assistant Property Economist, sam.hall@capitaleconomics.com