In July, closed sales of previously owned homes increased by 1.3% compared to June, reaching a seasonally adjusted annualized rate of 3.95 million units. This marked the first increase in five months, although sales were still 2.5% lower than the same time last year. The Northeast saw the biggest gains in sales, while the Midwest remained relatively flat. Additionally, prices rose the most in the Northeast region. Despite this modest improvement, Lawrence Yun, the National Association of Realtors’ chief economist, noted that home sales are still sluggish overall.
The increase in home sales can be attributed to several factors, including the rise in consumer choices and improved affordability due to lower interest rates. Sales in July were based on contracts likely signed in May and June when mortgage rates were over 7%. However, rates began to drop in July and are now around 6.5%, making homeownership more accessible to buyers. All-cash offers also played a significant role, accounting for 27% of July sales, up from the previous year and higher than the historical average.
The supply of homes for sale continued to increase in July, with 1.33 million homes on the market by the end of the month. This represented a 0.8% increase from June and a substantial 19.8% growth compared to July 2023. Despite the growing inventory, home prices remained high, with the median price of an existing home sold in July reaching $442,600, a 4.2% increase year-over-year. The rise in prices can be attributed to strong demand and limited supply, as the market struggled to meet the growing housing needs.
First-time buyers made up 29% of home sales in July, a figure unchanged from June but lower than the 30% recorded in July 2023. Typically, first-time buyers account for a larger share of home purchases, around 40%. However, affordability challenges, stemming from rising home prices and higher mortgage rates in recent years, have hindered their participation in the market. With mortgage rates now slightly lower, demand is slowly beginning to rebound.
The real estate market in July experienced a mix of positive and negative trends. While sales and inventory showed signs of improvement, challenges such as high prices and limited affordability continue to impact buyers’ decisions. Moving forward, the market will need to address these issues to sustain its momentum and support a more inclusive housing market for all potential buyers.