Two main factors are driving current sales activity: inventory availability and mortgage rates. “Unfortunately, both have been unfavorable to buyers,” says Lawrence Yun, chief economist at the National Association of REALTORS®.
Existing-home sales—completed transactions for single-family homes, townhomes, condos and co-ops—dropped 2.2% month over month in July and were down nearly 17% from a year ago, NAR reported Tuesday.
Home buyers are grappling with mortgage rates that have again broken 7%, considerably higher than last year’s 5% averages. Home prices are higher, too: The median existing-home price for all housing types in July was $406,700, up 1.9% from $399,000 a year earlier, NAR reports.
“Most homeowners continue to enjoy large wealth gains from recent years with little concerns about home price declines,” Yun says. “However, many renters are concerned, as they’re facing growing affordability challenges because of high interest rates.”
Ninety-four percent of consumers indicate in a recent survey that while they still consider homeownership part of the American dream, they also worry about whether they ever will be able to afford a home. They cited concerns over down payment requirements, high home prices and student loan debt, according to a recent survey from LendingTree.
“Retreating mortgage rates will bring more buyers and sellers to the market and get Americans moving again,” Yun says. He predicts the rate for the 30-year mortgage to fall near 6% by the end of the year, but he says that will heavily depend on what the Federal Reserve does next with its benchmark interest rate at its September meeting.
Homes Are Still Selling Fast
Seventy-four percent of homes sold in July were on the market for less than a month, NAR’s report shows. The average time on market was just 20 days, which is up from 18 days in June and 14 days a year ago. Many housing markets continue to report high buyer demand and bidding wars due to limited inventory.
Housing inventory remains historically low, as many homeowners appear reluctant to trade in the sub-3% mortgage rates they snagged just a couple of years ago. Inventory ticked up 3.7% in July compared to June, but the number of available homes remains low. Total housing inventory in July was still down about 15% compared to a year earlier. Unsold inventory was at a 3.3-month supply, NAR’s report shows.
Despite recent headwinds in the market, NAR’s latest housing report shows some buyer segments continue to be undeterred. The percentage of first-time home buyers, all-cash sales and individual investors were all up in July compared to a year ago. First-time home buyers comprised 30% of sales, up from 27% in June and 29% a year ago. All-cash sales accounted for slightly more than a quarter of home sales—26%, up from 24% a year earlier. Individual investors and second-home buyers, who tend to make up the biggest bulk of cash sales, purchased 16% of homes in July, up from 14% a year earlier, NAR’s report shows.
The West was the only major U.S. region in July to see a rise in month-to-month sales, according to NAR’s report. But all four major regions posted yearly declines, with the largest in the Northeast (down about 24%) and the Midwest (down 20%). Here’s a closer look at how home sales fared in July across the country.
- Northeast: Existing-home sales fell 5.9% month over month, reaching an annual rate of 480,000. Sales were down 23.8% from a year ago. Median price: $467,500, up 5.5% from one year ago.
- Midwest: Sales declined 3% compared to the prior month, reaching an annual rate of 960,000. Sales fell 20% from July 2022. Median price: $304,600, up 3.9% from a year ago.
- South: Existing-home sales dropped 2.6% from June, settling in at an annual rate of 1.86 million. Sales were down 14.3% from one year ago. Median price: $366,200, up 1.7% from July 2022.
- West: Sales rose 2.7% month over month, recording an annual rate of 770,000. But sales were still down 12.5% compared to the prior year. Median price: $610,500, unchanged from a year ago.