Home Sales Show a Positive Turn in July After Five Months of Decline
In July, the housing market witnessed a notable shift as closed sales of previously owned homes experienced an uptick. According to the National Association of Realtors, these sales rose by 1.3% when compared to June, reaching a seasonally adjusted, annualized rate of 3.95 million units. This increase marked the first gain in five months, although it’s important to note that sales were still 2.5% lower compared to the same period last year.
Regional Variations and Interest Rates The gains in home sales were not evenly distributed across the country. The Northeast saw the most significant increases, while sales remained flat in the Midwest. Alongside the sales figures, home prices also exhibited regional differences, with prices rising the most in the Northeast.
Lawrence Yun, the NAR’s chief economist, commented in a release that despite the modest improvement, home sales overall are still sluggish. However, he pointed out that consumers now have more choices, and affordability is gradually improving due to the decline in interest rates. The sales figures for July are based on contracts that were likely signed in May and June when mortgage rates on the popular 30-year fixed loan were well over 7%. Fortunately, rates started dropping in July and are currently hovering around 6.5%.
Cash Offers and Home Supply Another interesting aspect of the July housing market was the prevalence of all-cash offers. These accounted for 27% of July sales, which is an increase from 26% in the previous year and significantly higher than the historical norm.
The supply of homes available for sale continued to grow in July. By the end of the month, there were 1.33 million houses on the market, representing an increase of 0.8% from June and a substantial 19.8% increase compared to July 2023. At the current sales pace, this amounts to a four-month supply, which is slightly lower than the supply level in June.
Home Prices and First-Time Buyers Despite the increase in the supply of homes, it did not have the expected effect of cooling home prices. In fact, the median price of an existing home sold in July was $442,600, marking a 4.2% increase year over year.
First-time buyers made up 29% of sales in July. This figure remained unchanged from June but was down from 30% in July 2023. Historically, first-time buyers typically account for closer to 40% of home sales. However, in the last two years, affordability has been severely impacted by rapidly rising home prices and higher mortgage rates.
Signs of Increasing Demand With mortgage rates now slightly lower, there are signs that demand is starting to pick up. A separate report from Redfin, a real estate brokerage, found that requests for tours and other buying services from Redfin agents rose by 4% over the last week, reaching their highest level in two months.
In conclusion, while the July increase in home sales is a positive sign after several months of decline, the housing market still faces challenges related to affordability and the balance between supply and demand. The trends in different regions, the role of cash offers, and the behavior of first-time buyers all contribute to the complex landscape of the current housing market, which will continue to be closely watched in the coming months.