Home Sales See Modest July Uptick but Remain Stagnant Amid Anticipated Rate Cuts

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A Fresh Breeze in Home Sales: What July’s Numbers Reveal About the Housing Market

As summer swelters on, the U.S. housing market shows signs of a slight recovery. In July, sales of existing homes edged up by 1.3% from June, reaching a seasonally adjusted annual rate of 3.95 million, according to the National Association of Realtors® (NAR). Despite this modest rise, sales remain at their slowest pace for a July since 2010, reflecting a broader stagnation in the market.

The July figures underscore a market in flux. Although the median sales price for existing homes climbed to a record high of $422,600, a 4.2% increase from last year, the surge in prices has been constrained by a sluggish pace of sales. This persistent high pricing trend, marking the 13th consecutive month of year-over-year gains, is a testament to the limited inventory that continues to plague the housing market.

NAR Chief Economist Lawrence Yun attributes this stagnation to persistent supply constraints. "Despite the uptick, the overall market remains subdued," Yun explains. "Homebuyers are seeing more choices, and the improved affordability due to lower interest rates is helping, but the overall supply remains tight."

Mortgage rates, which have been a central concern for homebuyers, averaged 6.85% in July, a slight decrease from June's 6.92%. As expectations rise for a Federal Reserve rate cut, mortgage rates are anticipated to dip further, potentially reaching 6.3% by year-end. Realtor.com Chief Economist Danielle Hale notes, "Easing inflation has contributed to a decline in mortgage rates, which could benefit buyers this fall—a historically favorable season for home purchases."

However, the impact of these rate cuts might be mitigated by the ongoing scarcity of available homes. At the end of July, there were 1.33 million homes on the market, representing a four-month supply at the current sales rate. Although this figure is a 20% increase from the previous year, it remains significantly below the six-month supply deemed necessary for a balanced market.

An intriguing trend has emerged: newly built homes are now often cheaper than existing ones. In the second quarter, the median price of new homes was $412,300, approximately 2.3% lower than the $422,100 median price of existing homes. This reversal of long-standing trends highlights the shifting dynamics in the housing sector.

Regional disparities also paint a varied picture. Sales activity increased in all regions except the Midwest, which saw transactions remain unchanged at an annual rate of 920,000. The Northeast and the West reported notable increases, while the South experienced a slight rise. Despite these regional variations, all areas saw price increases, further underscoring the ongoing affordability challenges.

In summary, while July’s sales numbers indicate a small but hopeful uptick, the housing market remains constrained by high prices and limited inventory. As mortgage rates are expected to fall, the market’s response will be closely watched to gauge whether this will translate into more robust sales and improved affordability in the months ahead.