In July, closed sales of previously owned homes increased by 1.3% compared to June, reaching a seasonally adjusted, annualized rate of 3.95 million units. This marked the first increase in five months, although sales were still 2.5% lower than the same time the previous year. The Northeast region saw the largest gains in sales, while the Midwest remained relatively flat. Additionally, prices experienced the most substantial increase in the Northeast.
Despite the modest uptick in sales, Lawrence Yun, the Chief Economist of the National Association of Realtors, expressed that home sales are still sluggish. However, he noted that consumers have a wider range of choices and improved affordability due to lower interest rates. These sales are based on contracts likely signed in earlier months when mortgage rates were much higher, hovering around 7%. The decline in rates that began in July has brought them to approximately 6.5%.
In July, the percentage of all-cash offers increased to 27% of sales, up from the previous year, and notably higher than the historical average. The inventory of homes for sale also rose, with 1.33 million homes on the market at the end of the month. This represented an increase of 0.8% from June and a significant 19.8% jump from July of the previous year. However, despite the increase in supply, home prices continued to climb, with the median price reaching $442,600, up 4.2% year-over-year.
First-time buyers accounted for 29% of sales in July, remaining unchanged from June but down from 30% the previous year. Historically, first-time buyers make up a more substantial portion of home sales, closer to 40%. However, affordability challenges arising from rising home prices and interest rates constrained their ability to enter the market in recent years. With the slight decrease in rates, there is a renewed interest from buyers, indicating a potential shift in the market.
While the housing market showed signs of improvement in July, challenges remain, particularly in terms of affordability for first-time buyers. The fluctuations in mortgage rates and the supply of available homes will continue to impact the market dynamics as we move forward.