📊 Existing Home Sales

To: Institutional Clients

From: Global Economics Strategy Team

Date: April 2026

Subject: US Housing Market Update: Existing Home Sales Signal Persistent Stagnation

1. Executive Summary

The latest Existing Home Sales data reveals a market struggling to find a sustainable floor, characterized by high volatility and a lack of directional momentum. The March 2026 print of 3.98 million (SAAR) represents a sharp monthly contraction and brings the market back to its 12-month trough, erasing the modest gains seen in the first quarter of 2026.

Overall, the data suggests a "frozen" housing market where buyers and sellers remain in a deadlock. The failure to sustain the December 2025 peak indicates that any optimism regarding lower mortgage rates or increased inventory is being offset by persistent affordability constraints. For the Fed, this stagnation reduces the risk of a housing-led inflationary spike but underscores a broadening slowdown in consumer-led growth.

2. Five Main Views

• Sharp Monthly Retraction: Existing home sales fell by 3.6% month-on-month, dropping from 4.13 million in February to 3.98 million in March.
• Negative Annual Momentum: On a year-over-year basis, sales have declined by approximately 1.0% (from 4.02 million in March 2025 to 3.98 million in March 2026), confirming a lack of recovery.
• Transient Year-End Peak: The December 2025 spike to 4.27 million—the series high for the period—proved to be an outlier rather than a trend reversal, with sales reverting to the mean within 30 days.
• Range-Bound Volatility: The market has spent the last 12 months oscillating within a tight band (3.98M to 4.27M), suggesting a state of equilibrium at a depressed level of activity.
• Affordability Deadlock: The return to the 3.98 million level (matching the June 2025 low) indicates that the "lock-in effect" remains a dominant force, suppressing transaction volumes.

3. Macro Characterization

(i) Growth: The housing sector is currently a neutral-to-negative contributor to GDP. The lack of sustained growth in existing home sales limits the "multiplier effect" typically seen in home-related spending (furniture, renovations, appliances), suggesting a drag on broader private consumption.

(ii) Labor Market: While home sales are a lagging indicator of labor strength, the inability of the market to break above the 4.1 million mark suggests that real wage growth is not keeping pace with housing costs, limiting the pool of qualified buyers despite overall employment stability.

(iii) Inflation: From a price-discovery perspective, the stagnation in volume suggests a cooling of the "wealth effect." This lack of demand-side pressure is disinflationary, as it prevents a rapid acceleration in home prices and reduces the velocity of money within the real estate sector.

4. Policy Outlook

The data supports a dovish tilt for the Federal Reserve, though not an urgent one. With existing home sales returning to their annual low, the "housing channel" of monetary policy is clearly transmitting, effectively dampening economic activity.

Given the balance of risks—specifically the risk of a prolonged housing slump weighing on growth versus the risk of inflation—we forecast the Fed will maintain a hold at the next meeting, followed by a 25bps rate cut in the subsequent cycle. The Fed will likely wait for confirmation that the labor market is softening before easing, but the current housing stagnation provides them with the necessary "policy space" to cut rates without fearing an immediate overheating of the property market.