Existing home sales ticked up a bit in July, breaking a four-month losing streak as mortgage rates declined.
Existing home sales in July rose 1.3% to a seasonally adjusted annual rate of 3.95 million, the National Association of Realtors reported on Thursday. That is a bit more than economists had expected, although it does not go too far in clawing back the housing market declines in recent months. Home sales are still down 2.5% compared to a year ago.
Existing home sales peaked at 4.38 million in February.
Housing inventory has also been growing. The total inventory of existing homes was 1.33 million units in July, up less than 1% from the month before but up nearly 20% from a year ago.
Economists are hoping that the falling mortgage rates, coupled with more housing inventory, will eventually translate to the housing market heating up. While the latest report showed a bump in sales, it does not show that the dynamics are rapidly changing.
“Despite the modest gain, home sales are still sluggish,” NAR chief economist Lawrence Yun said. “But consumers are definitely seeing more choices, and affordability is improving due to lower interest rates.”
The median price of an existing home in February was $422,600, an increase of 3.2% from the year before. All four regions of the country that the NAR tracks posted price increases last month.
Additionally, homes typically remained on the market for 24 days in July, up from 22 days in June.
In a Thursday note, Jay Hawkins, senior economist at BMO Capital Markets Economic Research, said the weakness in home sales is expected to continue until the Federal Reserve finally pivots and begins cutting its interest rate target. The consensus is that the first rate cut will come next month.
Mortgage rates tend to move somewhat in tandem with interest rates, so they have begun to fall in response to expectations that the central bank will begin loosening monetary policy. Mortgage rates are expected to fall even further once the cutting begins. Investors expect the Fed to cut rates by at least a full percentage point by the end of the year.
As of Thursday morning, the average rate on a 30-year, fixed-rate mortgage was at 6.46%, according to Mortgage News Daily, which tracks daily changes in rates. That is down from a peak last year of above 8% and is the lowest that mortgage rates have been since May 2023. Home sales also affect the broader economy.
“Sales of homes generate down market sales of many household goods and furnishings and appliances, so the economy cannot be said to be firing on all cylinders when home sales activity is depressed,” FWDBONDS chief economist Chris Rupkey said. “Mortgage rates have just come down recently, so it may take some time for would-be home buyers to dip their toes back in the water.”
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Housing affordability is a big issue on the campaign trail as well, given that voters are already struggling to afford groceries and other goods because of the worst bout of inflation in generations.
Vice President Kamala Harris recently announced that if she wins the presidency, her administration will push for the construction of 3 million new housing units during her first term in office.