First American: Existing home sales remain subdued

Active inventory measures how many homes sit on the market at a point in time, but rising active inventory often reflects longer selling times rather than higher sales. New listings represent fresh supply and correlate more closely with increased sales activity. The bathtub analogy equates active inventory to water in the tub and new listings to the faucet; transactions depend on fresh supply flow. First American projects July sales to fall 0.2% from June and 1.4% year-over-year, citing reduced household formation and the mortgage rate lock-in effect. Regional differences show stronger sales in Midwest and Northeast despite limited new listings, while Southern and Western metros face affordability pressures.

Active inventory reflects the number of homes sitting on the market at any given point in time, but increases in active inventory don't necessarily translate into rising sales. It may just signal that homes are taking longer to sell, she said. New listings represent the fresh flow of supply entering the market and rising new listings are far more closely tied to increased sales activity.

Kushi described the dynamic through a bathtub analogy; the water already in the tub is active inventory, while the faucet represents new listings. Activity happens when fresh supply flows in. First American projects July sales will fall 0.2% from June and 1.4% from one year earlier. The main reasons for these declines are identified as reduced household formation and the ongoing impact of the mortgage rate lock-in effect.

The data show clear regional divides. In Midwest and Northeast metros, 68% fell into categories where sales were above average, even if new listings were limited. Southern and Western metros more often showed new supply entering the market without equivalent buyer demand, reflecting affordability pressures. For example, in El Paso, Texas, and Stockton, Calif., new listings increased, but buyers were slower to absorb them.

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