In July, closed sales of previously owned homes rose by 1.3% compared to the previous month. Although this marked the first gain in five months, sales were still 2.5% lower than the same time last year. The Northeast saw the biggest gains in sales, with the Midwest staying relatively flat. Prices also increased the most in the Northeast, indicating regional disparities in the real estate market.
Lawrence Yun, the chief economist of the National Association of Realtors, noted that despite the modest increase in home sales, the market remains sluggish. However, he pointed out that consumers are experiencing more choices and improved affordability due to lower interest rates. These sales data reflect contracts that were likely signed in May and June, when mortgage rates were much higher than they are now. The transition from rates over 7% to around 6.5% in July influenced buyers’ decisions and contributed to the uptick in sales.
An important factor affecting the real estate market is the balance between supply and demand. In July, the supply of homes for sale increased by 0.8% compared to the previous month. There were 1.33 million homes on the market, representing a 19.8% increase from July 2023. Despite the growth in supply, home prices continued to rise. The median price of an existing home sold in July was $442,600, up 4.2% year-over-year. This trend indicates that demand is outpacing supply, putting upward pressure on prices.
First-time buyers play a crucial role in the real estate market, but their participation has decreased in recent years. In July, first-time buyers accounted for 29% of sales, unchanged from June but lower than the 30% reported in July 2023. Normally, first-time buyers make up around 40% of home sales, but affordability challenges, including rising home prices and mortgage rates, have hindered their ability to enter the market. With rates now slightly lower, there is hope that demand will increase, benefiting both first-time buyers and the overall market.
The real estate market in July exhibited signs of improvement with an increase in closed sales and a growing inventory of homes for sale. However, challenges remain in terms of affordability, especially for first-time buyers. As the market continues to evolve, it will be essential to monitor how supply and demand dynamics, interest rates, and consumer preferences influence the trajectory of the real estate sector.