Home Sales Fall as Mortgage Rates Reach One-Year High

Sales of previously occupied U.S. homes decreased by 1.7% in July compared to June, reaching a seasonally adjusted annual rate of 4.06 million units, according to the National Association of Realtors (NAR). This figure was slightly above the 4.05 million pace anticipated by economists surveyed by FactSet, but represented a 0.7% increase from the previous year. The slowdown is attributed to a combination of record-high prices and the highest mortgage rates observed in over a year, creating significant financial barriers for potential buyers. Home prices continued their upward trend, setting new records for July. The U.S. median sales price saw a 2% increase from the prior year, reaching $434,100. This follows a June median sales price of $442,800, which was an all-time high for any month since NAR's data collection began in 1999. Home prices have now experienced 37 consecutive months of year-over-year increases. Adding to the strain on prospective homebuyers, the benchmark 30-year fixed-rate mortgage rate climbed to 6.69% last week, as reported by mortgage buyer Freddie Mac. This marks the highest rate in just over a year and is the fifth consecutive weekly increase, intensifying borrowing costs. Carl Weinberg, chief economist at High Frequency Economics, described the July housing market report as lacking positive news. He noted that homeowners with low mortgage rates from the pandemic era are reluctant to sell, leading to low inventory. Consequently, with fewer homes available for sale, the number of potential buyers is also constrained. Home sales have largely remained around a 4-million annual pace for approximately three years, a significant deviation from the historical norm of closer to 5.2 million units. The U.S. housing market has been in a subdued state since 2022, when mortgage rates began to rise from their historically low pandemic levels. In 2023, sales of existing homes were largely flat, marking a 30-year low. The sluggish sales trend persists as mortgage rates have generally trended upward in the period following the start of the war between the U.S. and other global entities, further impacting affordability and market activity.