The National Association of Realtors reported that sales of previously owned homes increased by 1.3% in July compared to June, reaching a seasonally adjusted annual rate of 3.95 million units. This marked the first gain in four months, although sales were still 2.5% lower than the previous year. The Northeast saw the biggest gains in sales, while the Midwest remained flat. Prices also rose the most in the Northeast. Lawrence Yun, NAR’s chief economist, noted that home sales are still sluggish, but consumers are experiencing more choices and improved affordability due to lower interest rates.
The increase in closed sales in July can be attributed to the lower mortgage rates that began dropping in July and are currently around 6.5%, compared to over 7% in May and June when the contracts for these sales were likely signed. All-cash offers made up 27% of July sales, up from 26% the year before and higher than the historical norm. The supply of homes for sale continued to rise in July, with 1.33 million homes on the market at the end of the month, representing a four-month supply at the current sales pace. This increase in supply did not, however, lead to a cooling of home prices.
First-time buyers accounted for 29% of sales in July, unchanged from June but down from 30% the previous year. Historically, first-time buyers make up closer to 40% of home sales, but affordability challenges such as fast-rising home prices and higher mortgage rates have impacted their ability to enter the market in recent years. With interest rates now slightly lower, demand is starting to increase, as indicated by a 4% rise in requests for tours and other buying services from Redfin agents over the last week, reaching the highest level in two months.
Overall, while the modest gain in home sales in July is a positive sign, the housing market is still facing challenges such as sluggish growth, affordability issues, and a lack of first-time buyers. However, the increase in supply and lower interest rates are starting to have a positive impact, with demand picking up and consumers having more options to choose from. It will be important to monitor how these trends continue to evolve in the coming months and their effect on the overall health of the real estate market.
