Existing home sales slipped again in July, falling 2.2% month over month to a seasonally adjusted annual rate of 4.07 million units, according to the National Association of Realtors (NAR).
Sales have been on a downward trajectory on a monthly basis since February, when a temporary drop in mortgage rates spurred buyers from the sidelines and fueled a transitory sales spike. Since then, however, existing sales have improved on a monthly basis only once — a slight May improvement of 10,000 units in the annualized rate that soon gave way to further declines.
Year over year, existing home sales continue to lag, with July activity down 16.6% from the same month in 2022.
Existing single-family home sales fell for the fifth straight month, slipping to a seasonally adjusted annual pace of 3.65 million units. That’s down 1.9% monthly and 16.3% yearly. Condominium and co-op resales came in at a pace of 420,000 units, down 4.5% from June and 19.2% from July 2022.
“Two factors are driving current sales activity – inventory availability and mortgage rates,” said Lawrence Yun, NAR’s chief economist. “Unfortunately, both have been unfavorable to buyers.”
Scotsman Guide readers agree, with 51% of respondents in a recent poll indicating that they believe elevated mortgage rates are the biggest factor currently holding back homebuyers. The ongoing shortage in supply received the second-most responses at 23%.
Neither factor appears headed for meaningful mitigation soon. The Federal Reserve has been adamantly coy about telegraphing its plans for future monetary policy, revealing only that it plans to keep up its assertive stance on rate hikes for as long as necessary to corral inflation.
Inventory, meanwhile, remains weak, with total housing inventory at 1.11 million units at the end of July. That’s up 3.7% from June but down 14.6% year over year. Unsold inventory is at a supply of 3.3 months at the current sales pace — up from 3.1 months in June and 3.2 months in July 2022 but still severely constrained.
Low supply has also kept prices on the uptick despite downward sales trends. The median existing home price in July was $406,700, up 1.9% annually. Those who already own homes are reaping the benefits as their home values keep climbing, but those looking to join the homeowner pool are increasingly being priced out.
“Most homeowners continue to enjoy large wealth gains from recent years with little concern about home price declines,” Yun said. “However, many renters are concerned as they’re facing growing affordability challenges because of high interest rates.”