Existing home sales inch up 1.3% in July, breaking four month decline streak

The U.S. housing market showed signs of stabilization in July as existing home sales increased for the first time in five months, according to data released by the National Association of Realtors (NAR). The 1.3% rise in sales volume brings a halt to a persistent decline that began in March, offering a tentative positive signal amidst ongoing market challenges.

The seasonally adjusted annual rate of existing home sales climbed to 3.95 million units in July, up from June's figures. However, this improvement comes with a caveat: sales remain 2.5% below the levels recorded in July 2023, when 4.05 million units were sold, indicating that the market is still grappling with long-term pressures.

NAR Chief Economist Lawrence Yun provided insight into the current market conditions, stating, "Despite the modest gain, home sales are still sluggish. But consumers are definitely seeing more choices, and affordability is improving due to lower interest rates."

The median existing home sales price continued its upward trajectory, reaching $422,600 in July. This represents a 4.2% increase from July 2023's median price of $405,600, marking the 13th consecutive month of year-over-year price appreciation. The consistent price growth underscores the ongoing demand-supply imbalance in the housing market.

Inventory levels saw a slight improvement, with the total housing stock at the end of July standing at 1.33 million units. This represents a marginal 0.8% increase from June and a more substantial 19.8% rise from the previous year when inventory stood at 1.11 million units. The months' supply of unsold inventory at the current sales pace was 4.0 months, down from 4.1 months in June but up from 3.3 months in July 2023. This gradual increase in available housing stock may provide some relief to buyers facing limited options.

Regional performance varied across the country. Three out of four major U.S. regions registered sales increases, while the Midwest remained steady. Year-over-year comparisons revealed a mixed picture, with sales rising in the Northeast and West but declining in the Midwest and South. This regional disparity highlights the localized nature of real estate markets and the varying economic factors affecting different parts of the country.

The REALTORS® Confidence Index, a key metric tracking market conditions, showed that properties typically remained on the market for 24 days in July. This represents an increase from 22 days in June and 20 days in July 2023, suggesting a slight deceleration in the pace of sales. The extended time on the market could provide buyers with more opportunity to consider their options and negotiate terms.

First-time homebuyers continue to face challenges in entering the market. They were responsible for 29% of sales in July, unchanged from June but down from 30% in July 2023. This figure remains below the annual share of 32% reported in NAR's 2023 Profile of Home Buyers and Sellers, released in November 2023, indicating persistent barriers for new entrants to homeownership.

All-cash sales accounted for 27% of transactions in July, showing a slight decrease from 28% in June but an increase from 26% one year ago. Individual investors or second-home buyers, who often make cash purchases, bought 13% of homes in July, down from 16% in both June 2024 and July 2023. This shift in investor activity could potentially create more opportunities for primary residence buyers.

Distressed sales, including foreclosures and short sales, remained a minor factor in the market, representing just 1% of sales in July. This figure has remained virtually unchanged from both the previous month and the prior year, suggesting stability in this segment of the market.

The mortgage rate environment continues to play a crucial role in shaping buyer demand. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.49% as of August 15. While this represents a slight increase from 6.47% one week prior, it marks a significant decrease from the 7.09% rate seen one year ago. This reduction in borrowing costs may be contributing to the improved affordability noted by NAR's chief economist.

In the condominium and co-op segment, sales in July remained steady at a seasonally adjusted annual rate of 380,000 units, unchanged from June. However, this figure represents an 11.6% decline from the 430,000 units sold in July 2023. The median existing condo price was $367,500 in July, up 2.7% from the prior year's $357,900.

Commenting on the condominium market's performance, Yun noted, "The median home price of condominiums is cheaper, yet the condominium market is underperforming compared to the single-family market. Rising maintenance and insurance costs have lessened the appeal for condominiums."

In contrast, single-family home sales showed more resilience, growing 1.4% to a seasonally adjusted annual rate of 3.57 million in July. This figure, however, still represents a 1.4% decrease from the previous year. The median existing single-family home price reached $428,500 in July, up 4.2% from July 2023.

As the housing market navigates through economic uncertainties, including inflation concerns and shifting monetary policy, the July data provides a nuanced picture. While the break in the sales decline offers a positive signal, the year-over-year decrease in sales volume and the continued rise in prices suggest that challenges persist for both buyers and sellers in the current market landscape.