The real estate market experienced a 1.3% increase in closed sales of previously owned homes in July compared to June, reaching a seasonally adjusted annual rate of 3.95 million units. Despite this slight improvement, sales were 2.5% lower compared to the same period last year. Sales performed best in the Northeast region, while the Midwest market remained flat. Additionally, prices saw the most significant increase in the Northeast, indicating regional variations in the market trends.
Lawrence Yun, the chief economist at the National Association of Realtors, highlighted that although there was a modest gain in home sales, the overall market remains sluggish. However, consumers are benefiting from increased choices and improved affordability due to lower interest rates. The recent sales data are attributed to contracts likely signed in May and June when mortgage rates were considerably higher. The subsequent drop in rates from over 7% to around 6.5% in July resulted in increased sales activity and improved affordability for potential buyers.
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 increase of 0.8% from June and a significant 19.8% higher than in July 2023. Despite the increase in supply, the market still faces challenges in cooling down home prices. The median price of existing homes sold in July surged to $442,600, marking a 4.2% year-over-year increase. The rise in prices can be attributed to persistent demand in the face of increased inventory levels.
First-time buyers accounted for 29% of total sales in July, remaining unchanged from June but down from 30% in July 2023. Traditionally, first-time buyers contribute around 40% of home sales, demonstrating the impact of affordability challenges on this segment of the market. Rapidly rising home prices and higher mortgage rates in recent years have made it difficult for first-time buyers to enter the market. However, the slight decline in mortgage rates is beginning to stimulate demand, indicating a potential shift in the market dynamics.
Overall, the real estate market in July 2024 shows signs of improvement with increased sales and a rise in inventory levels. Affordability remains a key concern, especially for first-time buyers, but the market is gradually adjusting to the changing interest rate environment. The regional variations in sales and price trends indicate the diverse nature of the real estate market and underscore the need for a nuanced approach to understanding and navigating the current market conditions.