For years, Americans have lamented that rising housing prices and elevated mortgage rates have made homeownership unaffordable for too many first-time homebuyers, while prompting many homeowners to stay put rather than sell.
In that environment, the supply of existing homes for sale, which makes up the bulk of the residential real estate market’s activity, has fallen significantly.
That trend may be reversing, however, which could spell good news. From April to May, the inventory of existing homes for sale rose 6.2% to 1.54 million units—the highest level since the COVID-19 pandemic peak in mid-2020 (see the chart). Supply also shot up 20.3% from May 2024.
Inventory of Existing Homes For Sale
Source: Bloomberg, calculations by Horizon Investments, data as of 5/31/25.
This upward shift in the supply of existing properties on the market is the latest sign that househunters may finally get a bit of a break. For example, existing home prices* in March fell (month-over-month) for the first time since January 2023, and continued to decline in April.
If inventories continue to rise and the Fed maintains its current “wait and see” approach to interest rate cuts, which seems likely unless the conflict with Iran worsens significantly, we could be transitioning to a more affordable housing market in the coming months.
* As measured by the S&P CoreLogic Case-Schiller U.S. National Home Price index.
By Mike Dickson, Ph.D.
Originally published at Horizon Investments
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The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index is a composite of single-family home price indices for the nine U.S. Census divisions and is calculated monthly. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. Indices are unmanaged and do not have fees or expense charges, both of which would lower returns. It is not possible to invest directly in an index. Information obtained from third party sources is believed reliable but has not been vetted by the firm or its personnel.
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