By Alex Veiga | The Associated Press
In July, sales of previously occupied homes in the United States declined to the slowest pace since January. Elevated mortgage rates and a persistently low inventory of available homes on the market contributed to discouraging potential homebuyers.
Last month, existing home sales dropped by 2.2% from June to a seasonally adjusted annual rate of 4.07 million, according to the National Association of Realtors (NAR). This fell below the anticipated pace of 4.15 million, as projected by economists from FactSet.
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Compared to July of last year, sales plummeted by 16.6%. Additionally, these sales figures represent the lowest for the month of July since 2010.
The steepest annual sales decline occurred in the Northeast and Midwest markets, with sales slumping by 20% or more, as reported by the NAR.
Despite the decrease in sales, the intense competition for the limited number of homes available pushed prices higher. The national median sales price rose by 1.9% from July of the previous year, reaching $406,700. This marks the first annual increase in prices since January.
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Due to the shortage of homes for sale, the market remains highly competitive, resulting in bidding wars for affordable homes in many areas. Approximately 35% of homes sold in July were acquired at prices higher than their listing prices, stated Lawrence Yun, the NAR’s chief economist.
Yun commented, “At least when it comes to home prices, it looks like the housing recession is already over.”
Overall, there were 1.11 million homes on the market at the end of July. This represents a 3.7% increase from June, but a 14.6% decrease from the previous year, according to the NAR.
Homes listed for sale in July typically sold within just 20 days, with 74% of them staying on the market for less than one month.
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When considering the current sales pace, the number of homes available at the end of July equated to a 3.3-month supply. In a more balanced market, there would typically be a 5- to 6-month supply, indicating a better equilibrium between buyers and sellers.
The combination of high borrowing costs and intense competition for affordable homes is deterring many first-time buyers. Last month, they accounted for just 30% of home sales, although this is an increase from 27% in June, according to the NAR.
According to Yun, “There’s virtually no inventory at the lower price point.”
The latest housing market data provides further evidence that a persistently low inventory of homes for sale and rising mortgage rates are hindering potential homebuyers.
Last month, the average rate for a 30-year home loan was just below 7% and has continued to rise, reaching 7.09% last week, according to mortgage buyer Freddie Mac. This places the average long-term U.S. mortgage rate at its highest level in over 20 years.
High rates can significantly increase monthly costs for borrowers, limiting their purchasing power in an already unaffordable market for many Americans. Additionally, they discourage homeowners who secured low rates two years ago from selling their homes.
Mortgage rates have been rising alongside the 10-year Treasury yield, which lenders use to determine rates on mortgages and other loans. As bond traders react to reports showcasing the resilience of the U.S. economy, a potential upward pressure on inflation may prompt the Federal Reserve to maintain higher interest rates for an extended period of time.
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