Although there may be more homes for sale now than in the last five years, this hasn’t translated into a surge in home sales yet.
According to the National Association of Realtors (NAR), existing home sales increased 2% in July from the previous month, and essentially held steady with July of last year, increasing by 0.8% year-over-year. If sales continue at the current pace, total home sales are expected to reach 4 million units by the end of the year — on par with annual home sales over the past two years.
This is a slightly more optimistic outcome than many were expecting, with some experts predicting existing home sales in July to see a slight decline this month. Higher sales are in part due to mortgage rates having ticked lower over the past few months, providing some relief to the high borrowing costs seen earlier this year.
“The ever-so-slight improvement in housing affordability is inching up home sales,” Lawrence Yun, chief economist at NAR, said in a press release.
According to Jason Waugh, the President of Coldwell Banker Affiliates, the small uptick in sales in July represents a potential change in buyer behavior in a market that so far has been mostly motivated by necessity.
“Buyers and sellers with immediate needs have remained active [in past months], while those motivated by preference have largely stayed on the sidelines,” Waugh says in an email to Money. “However, July’s increase in existing home sales suggests that buyer patience may be waning.”
Despite the slightly positive sales report this month, prospective buyers are still facing a tough market. Mortgage rates remain elevated despite the recent downward trend and there are concerns over a cooling economy that are still keeping many buyers on the sidelines.
Housing supply continues to improve
Current inventory stands at 1.55 million, the highest number since May 2020, during the height of the pandemic. This represents a 4.6-month supply of homes if sales were to continue at the current sales pace, and is a sign that the housing market is slowly returning to a more balanced state between supply and demand. A healthy market typically has a 6-month supply of homes.
Although the available housing supply has been steadily improving, it remains below pre-pandemic levels and has only seen a slight increase from the last month. However, this means more homes are available to buy now nationally than at any time since peak COVID lockdown numbers.
The uptick in housing supply has helped stabilize home prices. The median sales price in July was $422,400 — virtually unchanged from the same time last year. Although home prices have increased for the past 25 consecutive months, the rate of increase has been slowing. In fact, there is an increasing number of cities where home prices are decreasing, helping to improve affordability in some markets.
With more and more cities seeing different prices and inventory trends, more regional distinctions are starting to appear. This “hyperlocal” focus on real estate, Waugh says, has largely defined today’s landscape, where “local insights and strategies are more critical than ever.”
The July report seems to support this claim, with regional differences becoming more evident. Sales increased in every region except the Midwest. The largest growth occurred in the Northeast, with sales up by 8.7% month-over-month.
On the other hand, the Midwest, which historically has had affordable homes, saw home sales decline 1.1% from the previous month. Part of the reason for the decline, according to Yun, is that job growth in that region remains sluggish, which can slow down demand for homes.
With mortgage rates expected to move lower later this year and localized market conditions holding more influence over home sales than national factors, potential homeowners need to be aware of shifts in their local markets that could benefit their home search.
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Despite an increase in the number of homes for sale in the past five years, there has not been a significant surge in home sales. The National Association of Realtors (NAR) reported a 2% increase in existing home sales in July compared to the previous month, and a 0.8% increase from July of last year. This puts total home sales on track to reach 4 million units by the end of the year, similar to the past two years.
This outcome is more optimistic than expected, as some experts predicted a slight decline in existing home sales for July. The slight increase in sales can be attributed to lower mortgage rates in recent months, providing some relief from the high borrowing costs seen earlier this year.
Lawrence Yun, chief economist at NAR, believes that the slight improvement in housing affordability is contributing to the increase in home sales. Jason Waugh, President of Coldwell Banker Affiliates, also notes that the uptick in sales may indicate a change in buyer behavior, as buyers who were previously waiting on the sidelines are now becoming more active.
However, the housing market remains challenging for prospective buyers. Mortgage rates are still high despite the recent downward trend, and concerns over a cooling economy are keeping many buyers from entering the market.
The current inventory stands at 1.55 million, the highest number since May 2020. This represents a 4.6-month supply of homes if sales continue at the current pace, indicating a slow return to a more balanced market between supply and demand. However, the housing supply is still below pre-pandemic levels and has only seen a slight increase from the previous month.
The increase in housing supply has helped stabilize home prices, with the median sales price in July remaining virtually unchanged from the same time last year at $422,400. While home prices have been on the rise for the past 25 months, the rate of increase has been slowing. Additionally, there are now more homes available for purchase nationally than at any time since the peak of COVID lockdown numbers.
Overall, the housing market is showing signs of improvement, but there are still challenges for buyers. With the increase in housing supply and stabilizing home prices, it may be a good time for prospective buyers to enter the market.
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