Sales of Existing Homes Tick Up in July but Remain Sluggish Ahead of Rate Cut

Sales of previously owned homes increased slightly last month, but remained near historic lows as many homebuyers waited on the sidelines for mortgage rates to fall further.

Total existing-home sales ticked up 1.3% from June, to a seasonally adjusted annual rate of 3.95 million in July, the National Association of Realtors® reported on Thursday. The July sales figure, which excludes new construction, represented a 2.5% decline from one year ago and was the slowest July sales pace since 2010.

The median sales price for existing homes was $422,600 in July, up 4.2% from one year ago and the highest price on record for the month of July. Prices rose in all four U.S. regions on an annual basis.

“Despite the modest gain, home sales are still sluggish,” says NAR Chief Economist Lawrence Yun. “But consumers are definitely seeing more choices, and affordability is improving due to lower interest rates.”

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.85% for the month of July. That was down from 6.92% in June. Rates have since dropped further ahead of a widely expected cut to the Federal Reserve’s benchmark rate next month, and the Realtor.com® economics team expects mortgage rates to hit 6.3% by the end of the year.

“Mortgage rates have moved in a buyer-friendly direction after playing the foe for much of the peak homebuying season,” says Realtor.com Chief Economist Danielle Hale. “Easing inflation helped accelerate the decline in mortgage rates in mid-July, and rates currently hover near 15-month lows. This is likely to bode well for buyers in the fall—a typically advantageous season for home shoppers.”

A limited supply of homes for sale keeps prices high

The median sales price of existing homes in July dropped slightly from the all-time high set in June, a decline that follows typical seasonal trends. But July’s median price of $422,600 was still well up from a year ago, marking the 13th consecutive month of year-over-year price gains.

On a call with journalists, Yun said that lingering supply constraints could be part of the reason prices continue to rise, even as the number of home sales lingers near historic lows.

The supply of homes for sale at the end of July was 1.33 million units, which equals a four-month supply at the current sales pace, according to NAR. Although that’s up 20% from a year ago, it remains well below the six-month supply that economists say represents a balanced market.

“This is a transitional phenomenon that’s happening right now, where inventory is trying to increase back up to normal, but it’s not back up to normal yet” following disruptions from the COVID-19 pandemic, says Yun.

One unusual consequence of this situation is that newly built homes are now typically cheaper than previously owned homes, reversing longstanding trends.

During the second quarter of this year, the median price of a new home was $412,300, or 2.3% less than the $422,100 price for a median existing home, according to an analysis from the National Association of Home Builders.

“With the nation facing a housing affordability crisis, additional, attainable housing supply is the only way to sustainably ease housing cost burdens for American families,” says NAHB Chairman Carl Harris.

Sales activity climbed in all regions but the Midwest

Closed transactions for existing homes rose on the month in every region except for the Midwest, where they were unchanged in July at an annual rate of 920,000. That was down 5.2% from the previous year. The median price in the Midwest was $321,300, up 4.5% from July 2023.

In the Northeast, existing-home sales climbed 4.3% in July from June, to an annual rate of 490,000, an increase of 2.1% from July 2023. The median price in the Northeast was $505,100, up 8.3% from last year.

Existing-home sales in the South increased 1.1% from June, to an annual rate of 1.79 million in July, down 3.8% from one year before. The median price in the South was $372,500, up 2.3% from one year earlier.

In the West, existing-home sales rose 1.4% in July, to an annual rate of 750,000, also up 1.4% from a year ago. The median price in the West was $629,500, up 3.4% from one year ago.