Existing Home Sales: Why the Spring Thaw May Disappoint

Let's put the 3.91 million SAAR in perspective. Through most of 2025, existing home sales hovered in a tight band between 3.98 million and 4.15 million — already [historically depressed levels](/posts/2026-02-13/americas-new-housing-crisis-january-home-sales-plunge-84-but-homebuilder-stocks-are-surging-to-52-week-highs). December's jump to 4.27 million briefly sparked optimism, but January wiped that out and then some.

The monthly trajectory tells the story of a market stuck in neutral:

For context, pre-pandemic existing home sales typically ran between 5.0 and 5.5 million. We're operating at roughly 75% of normal volume — and have been for over two years now. The so-called recovery everyone keeps forecasting remains a mirage.

Here's the core problem the housing bulls keep underestimating: roughly 60% of outstanding mortgages carry rates below 4%. These homeowners are economically trapped. Even with the 30-year fixed now at 6.0%, selling means trading a 3.25% mortgage ([when refinancing makes sense](/posts/2026-02-28/how-to-refinance-your-mortgage-when-it-makes-sense-costs-and-process-in-2026)) for one that nearly doubles the monthly payment on the same house.

Rates have drifted about 20 basis points lower since December. That's not nothing — but it's nowhere near the 4.5% to 5% range most housing economists say would meaningfully unlock supply. With the Fed holding its funds rate at 3.64% and inflation still sticky, don't expect mortgage rates to plunge anytime soon. The geopolitical turmoil in the Middle East adds another wrinkle: [Treasury yields could spike](/posts/2026-03-09/treasuries-war-premium-reshapes-the-curve) on supply disruption fears, pushing mortgage rates back up before spring buyers even start looking.

The one genuinely positive development has been inventory. Months' supply of existing homes hit 9.0 in October 2025 before declining to 7.6 by December. That's still elevated compared to the sub-3.0 months we saw during the pandemic frenzy, but it represents a healthier market.

However, higher inventory in a low-volume market is a double-edged sword. It's not that more sellers are listing — it's that homes are sitting longer because buyers can't or won't pay current prices at current rates. That distinction matters enormously for where prices go from here.

Median existing home sale prices have actually been declining quarterly: $423,100 in Q1 2025, down to $416,100 in Q2, $410,100 in Q3, and $405,300 in Q4. That's a 4.2% decline from the Q1 peak. We're not in a crash — but the era of effortless home price appreciation is over.

New construction activity has been more resilient than the resale market. Housing starts hit 1,404,000 SAAR in December, rebounding from a trough of 1,272,000 in October. Builders have been offering rate buydowns and incentives to move inventory — a luxury that individual sellers in the resale market don't have.

This divergence — new construction holding up while resale volume craters — is the hallmark of the lock-in economy. Buyers who need a home are turning to new builds where they can get a 5.25% buydown rate. Existing homeowners sit on their 3% mortgages and wait. The result is a two-tier housing market that traditional metrics struggle to capture.

The February Existing Home Sales data, expected around March 20, will be the first real test of the spring selling season thesis. Consensus expects a modest bounce to around 4.0 million SAAR, which would still be one of the weakest February readings in decades.

Watch for three things in the report. First, the regional breakdown — Sun Belt markets like Phoenix, Austin, and Tampa have seen sharper inventory buildups than Northeast and Midwest markets. If Sun Belt transactions don't rebound, the national number won't either. Second, cash buyer share — if it stays above 30%, that signals investors and downsizers continue to dominate while first-time buyers remain locked out. Third, days on market — any expansion beyond 45 days would confirm the soft pricing environment.

The wildest card of all is oil. With [WTI crude pushing toward $100](/posts/2026-03-09/wti-crude-inside-the-100-breakout-setup) and geopolitical risk elevated, a sustained energy shock would crush consumer confidence and delay any housing recovery by quarters, not months. Housing is the most interest-rate-sensitive sector in the economy, and an inflation spike from oil would keep the Fed on hold longer than markets expect.