The U.S. housing market faces another setback as existing home sales dropped by 1.7% in July. The seasonally adjusted annual rate is now 4.06 million units, showing that the combination of high interest rates and record-high home prices is keeping many potential buyers on the sidelines.
Median home prices reached $434,100 last month. This marks 37 consecutive months of year-over-year price increases. Prospective buyers are also dealing with borrowing costs tied to the 30-year fixed mortgage rate, which recently hit 6.69%. This rate is at its highest level in more than a year.
Low inventory remains a primary issue in the current environment. There are 1.54 million unsold homes available, which represents a 4.6-month supply. A balanced market typically requires a 5- to 6-month supply, meaning current conditions are far from normal. Potential sellers with lower mortgage rates from the pandemic years are choosing to stay in their homes, which keeps the available stock at historic lows.
Economic factors, including inflation and bond yield shifts, continue to weigh on the sector. First-time buyers accounted for 29% of recent sales, a decrease from 33% in June. With fewer homes changing hands and prices remaining high, the market continues to struggle near a 4-million annual sales pace.