Existing Home Sales Edge Higher in July
Existing home sales increased for the first time in five months, according to the National Association of Realtors, as improving inventory and declining mortgage rates motivated more prospective buyers to act.
Despite these changes, sales remained sluggish and low inventory continued to push up median home prices. However, NAHB expects increased activity in the coming months as mortgage rates continue to moderate. Improving inventory is likely to ease home price growth and enhance housing affordability.
Home owners with lower mortgage rates have opted to stay put, avoiding trading existing mortgages for new ones with higher rates. This "lock-in" trend is driving home prices higher and holding back inventory. Mortgage rates are expected to continue to decrease gradually, leading to increased demand (and unlocking more of the lock-in inventory) in the coming quarters.
Total existing home sales rose 1.3% to a seasonally adjusted annual rate of 3.95 million in July. This marks the first increase after four months of declines. On a year-over-year basis, sales were still 2.5% lower than a year ago.
At the current sales rate, July unsold inventory sits at a 4.0-month supply (down from 4.1 last month, but up from 3.3 a year ago). This inventory level remains low compared to balanced market conditions (a 4.5- to 6-month supply) and illustrates the long-run need for more home construction.
The July median sales price of all existing homes was $422,600, up 4.2% from last year. This marked the 13th consecutive month of year-over-year increases. The median condominium/co-op price in July was up 2.7% from a year ago at $367,500. This rate of price growth will slow as inventory increases.
NAHB Senior Economist Fan-Yu Kuo provides more details, including regional and demographic breakdowns, in this Eye on Housing post.
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