Reasons to Expect a Sales Upturn

With rising inventory and the expectation of continued Fed rate cuts, increased sales can’t be far behind.

Retreat for First Timers

In August, first-time buyers accounted for 26% of sales, matching the all-time low last seen in November 2021. This is down from 29% in both July 2024 and August 2023.

A market requires both sellers and buyers. Good thing one constraint to home sales—the lack of supply—is easing. After about a decade-long decline, inventories were up by 20% in early fall from the same time a year ago. However, the number is still down by one-third from pre–COVID-19 days. Inventories will continue to rise as life and job changes lead more owners to put their home up for sale. Simply, the passage of time means more inventory. Furthermore, the locked-in effects of homeowners holding on to low interest rates fades when rates decline as they have in recent weeks. The 30-year fixed rate was in the high 7% range in spring but had fallen to the low 6% range by fall. That’s a savings of around $300 per month on a typical mortgage.

Lower mortgage rates were here even before the first rate cut by the Fed. That’s because longterm bond yields are not controlled directly by the Fed but based on multiple factors, including the anticipation of multiple rounds of cuts to the short-term Fed funds rate—possibly six to eight cuts from September to deep into 2025. Whoever occupies the White House in 2025, Americans will be looking at lower interest rates.

One interesting aspect of the seemingly more polarized politics is that we may get an extra bump in home sales after the election. According to a study published this year in The Journal of Finance, residents are 4% more likely to sell their property if a neighbor with opposing political views moves in. Is this an actual trend, or will things change after the current election cycle? Perhaps the notion of “love thy neighbor” will win out in the long run.

Supply & Demand

All trend lines are national from August 2023 to August 2024.

Confidence Returning

The percentage of NAR members who expected buyer and seller traffic to increase in the next three months was up in August compared with a year earlier and a month earlier.