Existing-home sales in the US hit a three-month low in July, as high prices and increasing borrowing costs kept weighing on the market.
The sluggish numbers indicate a stagnant housing market, where persistently high list prices and higher loan rates this year have kept numerous potential purchasers on the sidelines. Since the end of 2022, the pace of existing-home sales has remained around 4 million per year.
The typical home price rose 2% year-over-year to $434,100. This marked the priciest July ever and continued a run of yearly increases that began in mid-2023.
Earlier data indicated that the national median home price edged up 1.5% in the second quarter compared with a year earlier. The number of homes for sale is still below what it was before the pandemic.
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Existing-home sales have stayed close to a 4 million yearly pace since late 2022. In that time, inventory has stayed below pre-pandemic levels and prices have continued to rise. That persistent imbalance between limited supply and still-solid demand has kept the market from breaking out of its long slump, even as some buyers have been priced out entirely.
Yet affordability, by one measure, is improving. In a recent blog post, Mark Fleming, chief economist at First American Financial Corp., noted that the country's affordability squeeze is lessening relative to last year because income gains have generally exceeded home price increases. Still, the recent uptick in mortgage rates has eaten into some of that progress.
In the South, the largest home-selling region, existing-home sales dropped 3.1% to a four-month trough. The Midwest saw a 2% decline in sales. Sales held steady in the West and increased in the Northeast.
Buyers purchasing their first home made up 29% of July's transactions, down from 33% a month earlier. The retreat among first-time buyers is particularly telling, as they are often the most sensitive to affordability constraints and higher borrowing costs.
In a note, Oliver Allen, senior US economist at Pantheon Macroeconomics, said: "A significant housing market recovery is unlikely, as long as monetary policy remains relatively tight, the labor market subdued, confidence depressed, and population growth constrained by tighter immigration policies."
The combination of elevated prices, near-7% mortgage rates, and tight inventory suggests that any meaningful rebound in existing-home sales will have to wait until monetary policy eases and more listings come onto the market. Until then, the housing market is likely to remain in a holding pattern, with prices staying high and sales volume muted.
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