Existing home sales

Existing home sales are projected to reach 4.01 million units in 2026, reflecting a 1.8% decrease from the previous year. This decline is largely because of elevated mortgage rates, which are expected remained near 6.0% or higher through 2026. These rates have made home purchases less affordable and pushed many homeowners to remain in their current homes and renovate instead of moving and facing higher borrowing costs in a competitive market. Most current homeowners are also locked in to rates lower than current market levels, making them much less likely to take on a more expensive payment plan. Home prices also continue to rise, straining affordability. However, the drop in sales is partially offset by older homeowners who have the financial means to move into retirement homes or communities, a trend supported by the aging baby boomer population.

Between 2021 and 2026, existing home sales experienced considerable volatility. Sales peaked at 6.13 million in 2021 before contracting sharply, dropping by 17.1% and 18.9% in 2022 and 2023, respectively. Much of this fluctuation was tied to macroeconomic and monetary factors, especially the Federal Reserve's shift from an accommodative policy stance to rapid interest rate hikes starting in 2022. As inflation rose, the Fed increased benchmark interest rates, which raised mortgage costs and discouraged buyers and sellers. Many owners with low-rate mortgages were disincentivized to sell, reducing market liquidity. Declining rates in 2024 contributed to a much more muted decrease in sales, setting the stage for a modest 0.3% recovery in 2025.

Supply-side constraints also played a key role during this period. A limited supply of new homes led to price inflation in the existing home market. Elevated construction costs and regulatory barriers further restricted new home development, supporting higher existing home values. Strong labor market dynamics and rising household incomes at the onset of the current period supported underlying demand despite affordability concerns. Overall, existing home sales dropped by an annualized 8.1% over the five years to 2026, underscoring sensitivity to monetary policy swings and housing constraints.