Rosalind Evans
In a surprising turn of events, the housing market showed signs of life in July, with home sales rising for the first time in five months. According to the National Association of Realtors (NAR), closed sales of previously owned homes increased by 1.3% compared to June, marking a seasonally adjusted, annualized rate of 3.95 million units. Although this uptick is modest, it represents a critical shift in a market that has been sluggish for months.
A Glimpse of Recovery: Sales Show First Gain in Months
The July increase in home sales is a welcome development after several months of decline. While sales were still 2.5% lower than in July of the previous year, the 1.3% monthly rise indicates that the market may be starting to recover. The Northeast led the charge with the most significant gains in sales, while the Midwest remained flat. NAR’s chief economist, Lawrence Yun, noted, “Despite the modest gain, home sales are still sluggish. But consumers are seeing more choices, and affordability is improving due to lower interest rates.”
Rising Prices Amid Growing Supply
Despite the increase in supply, with 1.33 million houses on the market by the end of July—a 19.8% jump from last year—home prices continue to climb. The median price of an existing home sold in July was $442,600, marking a 4.2% year-over-year increase. This price rise, particularly in the Northeast, contrasts with the growing inventory, suggesting that demand remains robust even as more homes become available.
The Role of Mortgage Rates and Cash Offers
The July sales were largely influenced by contracts signed in May and June when mortgage rates for a 30-year fixed loan were over 7%. As rates began to drop in July, now hovering around 6.5%, demand has shown signs of picking up. All-cash offers, which comprised 27% of July sales, were up from 26% the previous year and remain well above historical norms. This trend highlights the ongoing competition in the market, particularly among buyers who can bypass the mortgage process.
Challenges for First-Time Buyers
Historically, first-time buyers comprised around 40% of home sales and only 29% of sales in July. This figure is unchanged from June but lower than the 30% observed in July 2023. The high home prices and fluctuating mortgage rates have made affordability a significant barrier for these buyers. However, with interest rates slightly lower, there are early signs that demand is beginning to increase. A report from Redfin, a real estate brokerage, indicated that requests for tours and other buying services rose 4% in the last week of July, reaching their highest level in two months.
The slight increase in home sales in July offers a glimmer of hope in a market that has struggled with affordability and fluctuating mortgage rates. While challenges remain, particularly for first-time buyers, the rise in sales and the growing supply of homes indicate that the market may be recovering. As interest rates stabilize, it will be interesting to see if this positive trend continues into the coming months.
