The housing market in July showed signs of recovery as closed sales of previously owned homes increased by 1.3% compared to June, according to the National Association of REALTORS® (NAR). This marked the first rise in sales in five months, though they were still 2.5% lower than in July of the previous year, indicating ongoing challenges in the market.
The Northeast led in both sales gains and price increases, while the Midwest saw no change in sales. NAR’s chief economist, Lawrence Yun, pointed out that the modest increase in sales suggests that consumers are beginning to see more choices and improved affordability, thanks in part to lower interest rates.
These sales were likely based on contracts signed in May and June when mortgage rates were over 7% for a 30-year fixed loan. With rates now around 6.5%, demand could be further stimulated.
The inventory of homes for sale rose to 1.33 million by the end of July, up 0.8% from June and 19.8% higher than in July 2023. This represents a four-month supply at the current sales pace, though it was slightly lower than in June. Despite the increased supply, home prices continued to rise, with the median price of an existing home sold in July increasing by 4.2% year-over-year to $442,600.
All-cash offers accounted for 27% of July sales, an increase from 26% the previous year and significantly higher than the historical average. First-time buyers made up 29% of sales in July, consistent with June but down from 30% in July 2023, highlighting ongoing affordability issues due to rising home prices and higher mortgage rates.
Even with these challenges, demand is beginning to pick up as mortgage rates decrease. Redfin reported a 4% increase in requests for tours and other buying services over the past week, reaching the highest level in two months, indicating potential for continued market recovery.
After months of elevated mortgage rates in 2024, the recent decline is making monthly home payments more affordable. As of last week, 30-year mortgage rates dropped to a 15-month low of 6.35%, down from a peak of 7.79% in October 2023. This reduction in rates translates to significant savings on monthly mortgage payments, which have decreased by $320 compared to the peak rate in 2023.
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