The real estate market saw a 1.3% increase in closed sales of previously owned homes in July compared to June. This uptick, however, marked the first gain in five months. Despite the positive momentum, sales were still 2.5% lower than the same time last year. The Northeast experienced the biggest gains in sales, while the Midwest saw flat sales figures. Additionally, prices surged the most in the Northeast region, indicating a potential shift in market dynamics.
Lawrence Yun, the Chief Economist at the National Association of Realtors, highlighted that home sales are still moving at a sluggish pace. Nevertheless, consumers are benefiting from increased choices and improved affordability due to lower interest rates. The housing market is directly impacted by mortgage rates, which dropped from well over 7% in May and June to around 6.5% in July. This decrease in rates has contributed to a more favorable buying environment for potential homeowners.
The supply of homes for sale continued to rise in July, with 1.33 million homes on the market by the end of the month. This represented an 0.8% increase from June and a substantial 19.8% surge from July 2023. Despite the growing inventory, the market still faces challenges in cooling off home prices. The median price of existing homes sold in July rose by 4.2% year-over-year, indicating persistent pressure on affordability for buyers.
First-time buyers made up 29% of home sales in July, showing no change from June but down from 30% in July 2023. Historically, these buyers constitute a larger portion of home sales, typically around 40%. The decline in first-time buyer participation can be attributed to the rapid increase in home prices and higher mortgage rates over the past few years. While rates have slightly decreased, affordability remains a key concern for this segment of buyers.
The real estate market in July showcased a mix of positive and challenging trends. Despite an increase in sales and a rising inventory of homes, the market continues to grapple with high prices and affordability issues. The shift in interest rates and buyer demographics further highlight the complex dynamics at play in the housing sector. As we move forward, it will be essential to monitor how these factors evolve and shape the future trajectory of the real estate market.