The ongoing slump in existing home sales is quite likely to curb consumer spending in the U.S. in the not-too-distant future, economists at First American Financial warn.

With the exception of the fourth quarter of 2024, existing home sales have declined year-over-year for 15 consecutive quarters. But durable goods purchases tied to housing are still growing, noted a posting from Odeta Kushi, deputy chief economist. That activity level is not sustainable.

“The resilience may reflect a lag, with consumers continuing to spend after moving,” Kushi said. “But, if existing-home sales remain subdued, history suggests that durable goods spending will eventually slow as well.”

How housing in measured in GDP

Housing contributes to U.S. gross domestic product in two ways. The first is categorized as residential fixed investment, which includes new home construction, major remodeling activity and brokers’ fees.

The other, housing services, includes rents paid by tenants, utilities and owners imputed rent.

“In the first quarter of 2025, the RFI totaled roughly 4% of GDP, slightly below its historical average of 4.5%,” Kushi said. “Housing services were 12.3% of GDP, a bit above the pre-pandemic norm of 11.4%.”

Existing home sales impact on GDP

Existing home sales are not part of this calculation, but they unleash other forms of spending, such as durable goods purchases and in demand for services, which Kushi said includes mortgage originations.

“A sustained downturn in sales can soften this extra consumption, which shows up in the GDP data,” Kushi said.

A reduction in transactions also affects income of the various people and entities involved in the residential sales process.

“Fewer home sales may not necessarily cause an economic downturn on their own, but they can contribute to softer household consumption and services output, particularly when the slowdown is prolonged,” Kushi explained.

“You can think of this as a kind of ‘housing turnover multiplier’ — the pace of sales impacts economic demand for a variety of products and services, even though existing-home sales themselves aren’t counted as new output in GDP,” she added.

Why existing home sales trends are important for the economy

Existing home sales are the proverbial canary in the coal mine for spending on “everything from couches to contractors and, ultimately, on the health of the broader economy,” said Kushi.

The First American report for May has existing home sales hovering just above 4 million units annualized, far below their pre-pandemic levels.

For June, it updated its Existing-Home Sales Outlook Report to for an expected decrease of 0.05% from the prior month’s pace, although they should increase 2.5% compared with one year ago.

The month-to-month decline will be a result of slower household formation (down 0.2%) and a stronger rate lock-in effect on current homeowners as measured by the spread between the prevailing market mortgage rate and the average rate for all outstanding mortgages. Its spread calculation has a two-month lag.

Remax reports homes sale growth

However, a 50-market report out of Remax found June was the fifth consecutive month for increased home sales. Activity was 1.3% higher from May and 5.7% above June 2024.

Even those numbers were a mixed bag. Prices rose again, to a median of $440,000, a gain of 2.8% over the prior month and 2.1% versus one year ago.

Inventory increased 3.9% over May and by 30.1% year-over-year. It is now up to 2.7 months’ supply, compared with 2.5 months in May and 2.1 months last June.

But the number of new listings coming onto the market in June were 12.8% lower than the prior month. It was still higher on an annual basis, by 1.4%.

The current market is healthy enough for buyers to have “the opportunity to make confident moves,” declared Erik Carlson, Remax CEO, in a press release.

Closed transactions rose by 1.3% month-to-month and 5.7% over June 2024.

“On a national basis, the market continues to be resilient with more homes, more movement, and more opportunity, which is good news,” Carlson said. “Buyers are finding more options, and sellers are seeing demand.”