Sales of existing homes in the United States rebounded in July, breaking a four-month decline streak. This increase was supported by lower mortgage rates and an uptick in the number of properties available for sale, motivating potential homebuyers. The National Association of Realtors reported a 1.3% rise in existing home sales last month compared to June, reaching a seasonally adjusted annual rate of 3.95 million.
Even though July’s sales were 2.5% lower than the same month last year, the figures surpassed economists’ expectations of 3.92 million units. Home prices continued to climb, marking a 4.2% increase from the previous year to a national median sales price of $422,600, setting a record high for July. Lawrence Yun, the NAR’s chief economist, noted that while there was a modest increase in sales, the market still exhibited sluggishness.
The housing market in the U.S. has been struggling since 2022, mainly due to rising mortgage rates. The average rate for a 30-year mortgage peaked at 7.79% amid the pandemic, hitting a nearly 30-year low in home sales. However, mortgage rates have been gradually decreasing, reaching around 6.5% this month, the lowest level in over a year.
Despite the positive shift in sales and lower mortgage rates, homeownership remains challenging for many Americans due to soaring home prices. The NAR reported an increase in unsold homes, with about 1.33 million properties available by the end of July. This represents a 4-month supply at the current sales rate, compared to a 3.3-month supply a year earlier, indicating a slight improvement in inventory.
Additionally, the slowdown in home sales was reflected in an increased number of days properties spent on the market before being sold, with fewer homes receiving multiple offers. As a result, the market saw a decrease in the percentage of homes selling above the original list price compared to the previous year.
First-time homebuyers faced challenges in entering the market due to the lack of home equity for down payments, accounting for 29% of all sales in July. Meanwhile, buyers able to pay in cash represented 27% of sales, and individual investors or those purchasing second homes accounted for 13% of transactions. Economists anticipate a further uptick in home sales if mortgage rates continue to decline.
Expectations of a Federal Reserve interest rate cut and decreasing inflation have contributed to the downward trend in mortgage rates, potentially benefiting buyers in the upcoming fall season. Realtor.com projects a further reduction in the average 30-year mortgage rate to 6.3% by the end of the year, which could stimulate more activity in the housing market.
