July Sees Modest Uptick in Home Sales as Market Navigates a Delicate Recovery

• “The U.S. housing market remains resilient despite higher interest rates, but affordability challenges are pushing more buyers to the sidelines.”
  — Lawrence Yun, Chief Economist at the National Association of Realtors (NAR)
• “The combination of low inventory and high demand has kept home prices elevated, but we’re seeing some moderation as buyers adjust to the new reality of higher borrowing costs.”
  — Robert Dietz, Chief Economist, National Association of Home Builders (NAHB)

In the ebb and flow of the housing market, July brought a subtle shift—a pulse, a heartbeat quickened by the lure of slightly eased mortgage rates. The numbers, though modest, tell a story of reawakening. After four months of slumber, sales of existing homes edged upward by 1.3%, breaking the downward trajectory that began in March. The National Association of Realtors’ latest figures show the market stirring from its prolonged lull, with an annual rate of 3.95 million homes changing hands, just nudging past the expectations of economists.

US existing home sales rise more than expected in July https://t.co/MB7fqc8ZZC pic.twitter.com/fyIJJatcc3

— Reuters Politics (@ReutersPolitics) August 22, 2024

Yet, this isn’t a tale of triumphant resurgence; rather, it’s a delicate dance on the edge of hope and caution. The market still bears the weight of its struggles—a year-over-year decline in sales persists, a 2.5% drop that whispers of the challenges still looming. The median home price, ever the relentless climber, now stands at $422,600, marking the 13th consecutive month of price increases. It’s as if the market is a tightrope walker, balancing on the thinnest of wires between recovery and retreat.

“Despite the modest gain, home sales are still sluggish,” admits Lawrence Yun, NAR’s chief economist, grounding us in the reality that, while there’s movement, it’s far from a sprint. The market, in its cautious advance, reveals more choices for buyers—an expanding inventory that promises to ease the stranglehold of limited options. Yet, the specter of high prices and steep mortgage rates continues to cast a long shadow over the optimism.

The easing of mortgage rates, dipping to their lowest levels since February, offers a glimmer of respite—a fleeting moment where affordability doesn’t seem entirely out of reach. But the road ahead remains uncertain, with Thursday’s report serving as a reminder that the shock of soaring costs is still very much embedded in the market’s fabric. The sticker shock, that sharp intake of breath at the sight of rising prices, isn’t fading away; it’s merely being absorbed into the new normal.

Existing home sales rose by a modest 1.3% m/m in July (consensus 1.3%), up from -5.1% in June and declines in the prior 3 months as well.

Home sales were also either flat or higher across all regions in July, with the Northeast leading the way (4.3% vs -2.1% prior), followed by… pic.twitter.com/hNALwslNBo

— Parker Ross (@Econ_Parker) August 22, 2024

Across the regions, the story unfolds with varying degrees of intensity. The Northeast, with its bustling cities and storied landscapes, saw the most significant leap—a 4.3% rise in sales, where homes now fetch an average of $505,100, an 8.3% increase from the previous year. In the South, the rhythm is more subdued, with a 1.1% rise in sales and median prices climbing to $372,500, a 2.3% year-over-year increase. Out West, where the land stretches wide and the sky feels endless, existing home sales ticked up by 1.4%, with prices touching $629,500—a 3.4% ascent from last July. The Midwest, the heartland, remains steady, unchanged in its pace but not immune to the upward push of prices, where the median now sits at $321,300, up 4.5%.

Inventory, the lifeblood of the market, saw a slight increase—1.33 million homes stood unsold by the end of July, a 0.8% rise that offers a faint hope for balance, though far from the six months of supply that signifies equilibrium. It’s a delicate dance, this market, swaying to the rhythm of mortgage rates, which hover at 6.49% for a 30-year fixed rate. Lower than last year, yes, but still high enough to keep many on the sidelines, waiting for the scales to tip further in their favor.

Even as some dare to reenter the fray, there’s a palpable sense of hesitancy, a collective holding of breath. Companies, too, tread cautiously, wary of predicting a sharp rebound in activity. The lock-in effect—where homeowners, snug in their 4% mortgages, are reluctant to venture into the uncertain waters of higher rates—continues to exert its influence.

The NAR data show existing home sales are up 1.3 percent in July from June to 3.95 million units at a seasonally adjusted annual rate. pic.twitter.com/EJcdSovAnG

— Econoday, Inc. (@Econoday) August 22, 2024

“We are hopeful,” muses Lowe’s CFO Brandon Sink, capturing the tentative optimism that pervades the market. The hope is that lower rates will not only ease the burden on consumers but also breathe life back into existing home sales. Yet, the reality remains complex, a landscape where every move is met with a counterbalance, every gain tempered by the lingering effects of a market still finding its footing.

Quotes and Information

• “For many potential homebuyers, the jump in mortgage rates has been a shock to the system, leading to a cooling in home sales and price appreciation.”
  — Mark Fleming, Chief Economist at First American Financial Corporation
• “We are in a period of transition in the housing market, where sellers are holding firm on prices while buyers are more cautious, waiting for rates to come down.”
  — Diana Olick, CNBC Real Estate Correspondent
• “The market is still favoring sellers, but the dynamic is changing as affordability constraints limit the pool of qualified buyers.”
  — Selma Hepp, Chief Economist at CoreLogic
• Home Sales: Existing home sales in the U.S. have seen fluctuations due to varying interest rates and economic conditions. In 2023, the National Association of Realtors (NAR) reported that existing home sales totaled approximately 5.03 million, a slight decrease from the previous year, reflecting the impact of rising mortgage rates.
• Median Home Prices: As of mid-2024, the median existing-home price for all housing types was around $416,100, showing an increase of about 2.9% compared to the previous year. However, price growth has slowed compared to the double-digit increases seen during the pandemic years.
• Inventory: The housing market remains tight, with inventory levels hovering around a 2.7-month supply, which is well below the 6-month supply typically considered a balanced market.
• Interest Rates: Mortgage rates have been a key factor influencing the housing market. As of 2024, the average 30-year fixed mortgage rate is around 6.75%, up from 3.25% in 2021, leading to reduced affordability for many buyers.

Major Points

• In July, existing home sales rose by 1.3%, breaking a four-month decline, as slightly eased mortgage rates offered a glimmer of hope for buyers.
• Despite the increase, the market remains cautious, with a 2.5% year-over-year decline in sales and the median home price reaching $422,600, marking the 13th consecutive month of price increases.
• Regional variations show the Northeast leading with a 4.3% sales increase, while the South, West, and Midwest saw more modest gains, reflecting the uneven nature of the market’s recovery.
• Inventory levels saw a slight rise to 1.33 million homes, offering more choices for buyers, though still far from the ideal six months of supply.
• The market continues to balance on the edge, with homeowners hesitant to sell due to higher mortgage rates, and the broader outlook remains uncertain as the impact of high costs persists.

Al Santana – Reprinted with permission of Whatfinger News