Analyst says population growth over time needs to be taken into account when assessing the market's performance compared with past eras
US population growth over time means one expert believes the current pace of home sales is actually far worse by historical standards than originally thought.
Mark Fleming (pictured top), First American chief economist, said that because the housing market has expanded in recent decades, looking at raw house sales data doesn’t give you the whole picture.
“Comparing today's home sales to those in the past without considering the growth in the overall market size is like comparing today’s apples with yesterday’s oranges,” Fleming told Mortgage Professional America.
“The total number of US households, which represents the demand for homes, is constantly growing. So, an annual pace of 4 million existing-home sales today is, relatively speaking, much weaker than the same number 15 years ago, given the increase in demand.”
Fleming pointed out that the total number of households in the US has increased by 18% over the last 15 years, from 112 million in 2010 to 132 million in 2025.
While pending home sales have increased recently, the February report from the National Association of Realtors (NAR) showed numbers still near historic lows. As bad as that sounds, Fleming suggests that when the pace of home sales is compared to past decades and the increase in total households, the numbers look even worse.
“In February, total combined home sales were 5 million seasonally adjusted annualized sales, or 3.7% of total households, which is 1.1 percentage points below the historic pre-pandemic average of 4.8%,” Fleming said. “If total home sales were tracking at the long-run average percentage of total households, the pace would be 6 million. Other than the brief dip in 2010, due to the expiration of the first-time home buyer tax credit, this level of sales activity as a share of total households is similar to the early 1980s.”
While Fleming isn’t predicting that the housing market trend will continue on the same path as that decade, there are similarities between that era and the present.
“They say history doesn’t repeat itself, but it does rhyme,” Fleming said. “In the late 1970s and very early ‘80s, the Federal Reserve increased rates dramatically to combat inflation, which caused the pace of home sales to decline significantly as mortgage rates peaked in 1981 at 18.1%. The magnitude of inflation and monetary tightening is not the same today, but the reasons for it certainly rhyme with the early ‘80s.”
Tariffs could hammer the new home market
The data analyzed by Fleming predate the recent tariffs imposed by the Trump administration. They also don’t consider counter-tariffs, which could be coming from Europe later this week.
Fleming is hopeful that the tariffs could ultimately lead to a chain reaction, including a continued decline in mortgage rates, which would lower mortgage payments for new loans.
“In times of economic uncertainty or stress, there is often a capital flight to the safety of US Treasury bonds, which can lower long-term bond rates and, in turn, lower mortgage rates,” Fleming said. “This offers an affordability boost to the housing market. This spring, as new listings are increasing and supply is growing, if affordability improves, it may stimulate more demand.”
Home buyers may also get relief from the Federal Reserve, which some traders believe may cut rates five times now in 2025, including a potential emergency rate cut.
Traders expect the Federal Reserve to cut interest rates five times in 2025, with increasing odds of an emergency cut due to President Trump's tariffs causing market turmoil and recession fears.https://t.co/toV7wUYrgD
— Mortgage Professional America Magazine (@MPAMagazineUS) April 7, 2025
Current housing market sluggishness not seen for more than 30 years
Fleming noted that when comparing home sales as a percentage of total households over time, the numbers are similar to those of the housing market from 30 years or more ago.
For the existing sales market, he notes that sales as a percentage of the total number of households is just above 3%, which is the same level last seen in the early 1990s.
“If home sales today were tracking at the long-run average percentage of total households, the pace would be almost 5.4 million,” Fleming said. “So, compared to the current pace of 4.26 million sales, where did more than a million sales go?”
Fleming believes that while affordability is an issue for first-time home buyers, the real problem is that existing homebuyers, who are locked into affordable mortgage rates, aren’t selling.
The picture is similar in the new home market. The number of new home sales as a percentage of the total number of households is 0.5%, similar to the early 1990s, and below the long-run average of 0.7%.
“The reasons for this decline are different from the existing-home market,” Fleming said. “Builders face less competition due to the chronic housing shortage made worse by the ‘seller’s strike,’ but their construction costs have increased significantly.
“They also have to navigate regulatory restrictions, making it difficult to scale up construction to meet growing demand, let alone reduce the overall housing supply shortage.”
Fleming said that by comparing new home sales with the increase in housing inventory, more insight can be gained into the true health of the market.
“The current state of both existing-home and new-home sales highlights the importance of adjusting for household growth when analyzing the housing market,” Fleming said. “
While the number of sales may seem comparable to past decades, the growing number of households and changing market dynamics reveal a different story. By considering the number of home sales as a percentage of total households, we gain a clearer picture of the market's true performance.”
A drop in home prices could spur an increase in homebuying, but it may also deter potential sellers from entering the market.
“While declining home prices could help improve affordability for the first-time home buyer, it also discourages existing homeowners from selling at a ‘perceived’ loss,” Fleming said. “The slow pace of sales is largely a result of existing homeowners' unwillingness to sell. Falling prices would be one more reason not to jump in.”
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