Housing Sales Stuck in Neutral, Keeping Pressure on Prices

Editor’s note: There won’t be any commentary on 11/27 through 12/1 due to the Thanksgiving holiday and the office being closed.

Housing Sales Stuck in Neutral, Keeping Pressure on Prices

• There were 1.53 million existing homes for sale in October.

• That equals 4.4 months’ worth of supply.

• The median sales price declined on an annualized basis.

Wall Street’s eyes are on rate cuts, but housing weakness is quietly reshaping the outlook…

The past few weeks have been turbulent for investors. After hitting a new high just before the Federal Reserve’s October 29–30 meeting, the S&P 500 Index has slipped, giving back about 4.2%. Nearly half of that decline came last week.

The problem has been the noise around the Fed’s upcoming interest rate decision on December 10–11. Policymakers have been voicing their opinions on whether to cut rates again or hold steady. They’re split on what matters more: slowing job growth or stubborn inflation. Wall Street fears this back-and-forth means a cut may not happen.

But while investors have been fixated on the Fed, they’ve overlooked a key inflation signal: housing sales are stuck in neutral. Redfin recently reported properties sat on the market for an average of 51 days in October, up from 42 in 2024. The last time homes took this long to sell was 2015, when the average was 55 days.

The National Association of Realtors (“NAR”) confirmed the trend last week. Existing home sales held steady at an annualized pace of 4.1 million in October, still near the bottom of a multi-year range. In addition, available inventory stayed at 1.53 million, above pre-pandemic levels. That extra supply is pressuring prices. Lower prices should help cap inflation and give the Fed room to keep cutting rates—fuel for a steady rally in the S&P 500.

But don’t take my word for it, let’s look at what the data is telling us…

Each month, NAR releases housing indicators. Existing home sales make up 85–90% of total volume, so they’re a key gauge of market health. In September, months’ supply, a measure of how long it would take to sell all listed homes, was 4.4. That’s down from 4.6 in August but still above pre-pandemic levels.

NAR’s time-on-market numbers were lower than Redfin’s, but the trend matched. Properties lingered for 63 days in September, up from 62 in August and 57 a year earlier. Inventories have hovered near their highest level since early 2020.

And prices? They’re slipping. Realtor.com says the median listing price per square foot was $225 in October, down from $226 in September and off 0.4% year-over-year. That’s the second straight month of annualized decline, a rare event since mid-2023, and a sharp contrast to the 24% surge in April 2021. The market hasn’t looked this soft since the Fed was still hiking.

Sale prices tell the same story. NAR reports the median price of an existing home sold in October was just over $415,200, up 2% year-over-year. But that’s flat compared with September and far below the 25% surge in June 2021. October marked the seventh straight month of annualized growth at 2% or less. The last similar stretch was mid-2023, right before the Fed ended its tightening cycle.

Bottom line: high inventory is capping prices. The Fed’s cautious stance on rate cuts is keeping buyers on the sidelines. With homeowners more likely to refinance than relocate, sales may stay sluggish for a while.

Housing prices make up about 35% of the Consumer Price Index (CPI) and 17% of the Personal Consumption Expenditures (PCE) index. Falling prices are likely to weigh on rental pricing power. That could drag down owners’ equivalent rent, a key component of both CPI and PCE. Swelling supply should help tame inflation in the months ahead and boost the odds of future rate cuts—supporting a steady rally in the S&P 500.

Five Stories Moving the Market:

Federal Reserve Bank of Boston President Susan Collins (voter) said she hadn’t made up her mind over how to vote at the central bank’s next monetary policy meeting; she said she would take continued signs of weakening employment “seriously” – Bloomberg. (Why you should care – earlier last week Collins said she was hesitant to lower rates given upside risks to inflation)  

Treasury Secretary Scott Bessent said the White House is working on bringing down U.S. health-care costs and an announcement to address the issue is planned for this week – Bloomberg. (Why you should care – falling health care costs would weigh on the inflation growth outlook)

Canada and India have agreed to restart stalled talks for a new trade deal, the Indian government said, after discussions between the two countries paused following a diplomatic spat two years ago – Reuters. (Why you should care – the two countries are hoping to double total trade by 2030)

Federal Reserve Bank of New York President John Williams (dove, voter) said that U.S. interest rates could fall without putting the Fed's inflation goal at risk, while helping guard against a slide in the job market; he said modestly restrictive policy provides room for additional easing – Reuters. (Why you should care – bond market odds of a rate cut at the December monetary policy meeting jumped from 30% to 70%)

Business leaders sound less gloomy about tariffs than they have for much of the year; they are talking less about risk when they discuss them with investors, and the subject is no longer dominating earnings calls like before – WSJ. (Why you should care – businesses are paying less in tariffs than the dramatic figures that dominated the headlines earlier this year)

Economic Calendar:

Earnings: A

Markets are Closed in Japan

ECB’s Lagarde (President) Speaks (Saturday)

Fed’s Collins (Boston, Voter) Speaks (Saturday)

SNB’s Schlegel (Chairman) Speaks (Saturday)

Germany – Ifo Business Climate Index for November (4:00 a.m.)

U.S. – Chicago Fed National Activity Index for October (8:30 a.m.)

Canada – Manufacturing Sales for October (8:30 a.m.)

U.S. – Industrial Production, Capacity Utilization Rate for September (9:15 a.m.)

U.S. – Industrial Production for October (9:15 a.m.)

ECB’s Lagarde (President) Speaks (9:50 a.m.)

U.S. – Dallas Fed Manufacturing Index for November (10:30 a.m.)

Treasury Auctions $86 Billion in 13-Week Bills (11:30 a.m.)

Treasury Auctions $77 Billion in 26-Week Bills (11:30 a.m.)

ECB’s Nagel (Germany) Speaks (12:45 p.m.)

Treasury Auctions $69 Billion in 2-Year Notes (1 p.m.)