Existing Home Sales Experience Largest Decline in 16 Months

Existing home sales experienced their largest monthly decline in over a year in March. According to the data from the National Association of Realtors (NAR), existing home sales fell 4.3% from February to reach a seasonally adjusted annual rate of 4.19 million units. This figure came in lower than the expected 4.20 million. Existing home sales are down 3.7% compared to one year ago.

Existing homes have been experiencing a consistent downward trajectory over the past two years, with monthly sales declining 20 of the past 26 months.

"Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves," said NAR Chief Economist Lawrence Yun. "There are nearly six million more jobs now compared to pre-COVID highs, which suggests more aspiring home buyers exist in the market." Read More

Background on Existing Home Sales

Existing home sales measures the monthly sales of previously owned single-family homes. It makes up a huge part of the residential real estate market, as 88% of homes purchased last year were previously-owned homes according to the National Association of Realtors. More importantly, there exists a strong correlation between purchases of existing homes and consumer spending. An increase in existing home sales can indirectly stimulate economic activity with increased consumer spending on new furnishings and appliances. Alternatively, a sustained drop in existing home sales often foreshadows a downturn in the economy.

Here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 was previously available in the St. Louis Fed's FRED repository and is now only available for the last twelve months.

Existing Home Sales

Over this time frame, we clearly see the real estate bubble, which peaked in 2005 and then fell dramatically. Sales were volatile for the first year or so following the Great Recession with monthly sales as low as 3.45 million units to as high as 5.44 million units. We have seen that same volatility following the most recent recession, with sales ranging between 3.85 million units to 6.73 million units.