U.S. Home Sales Rebound in July Amid Easing Mortgage Rates

The U.S. housing market showed signs of recovery in July 2023, with existing home sales increasing by 1.3% compared to June. This upturn marks the end of a four-month decline, according to data released by the National Association of Realtors (NAR). The organization, established in 1908, reported that sales reached a seasonally adjusted annual rate of 3.95 million units.

Despite this positive development, the market still faces challenges. Year-over-year sales decreased by 2.5%, indicating ongoing hurdles in the housing sector. The median sales price for existing homes rose by 4.2% compared to July 2022, reaching $422,600. This marks the 13th consecutive month of annual price increases.

Lawrence Yun, NAR's chief economist, commented on the situation:

The housing inventory saw a notable increase, with approximately 1.33 million unsold homes available at the end of July. This represents a 0.8% increase from June and a significant 19.8% rise from July 2022. The current inventory translates to a 4-month supply at the present sales pace, up from a 3.3-month supply a year ago. Historically, a 5- to 6-month supply is considered a balanced market.

The recent housing market slump, which began in 2022, was primarily triggered by rising mortgage rates. The average rate on a 30-year mortgage reached a 23-year high of 7.79% in 2023, according to Freddie Mac, an organization created in 1970 to support the secondary mortgage market. This peak surpassed even the rates seen during the housing bubble that burst in 2008.

However, recent trends show signs of improvement. Mortgage rates have been easing, with the average 30-year home loan rate dropping to around 6.5%, its lowest level in over a year. This is still significantly higher than the record low of 2.65% seen in January 2021 but offers relief to potential homebuyers.

The housing market's future looks cautiously optimistic. Signs of waning inflation and a cooling job market have raised expectations that the Federal Reserve might cut its benchmark interest rate in September 2024, for the first time since 2020. This potential move could further improve affordability in the housing market.

It's worth noting that the U.S. housing market has undergone significant changes over the decades. The average size of new single-family homes has increased from about 1,600 square feet in 1973 to over 2,400 square feet in 2023, reflecting changing consumer preferences and economic conditions. Additionally, the concept of "starter homes," which became popular in the post-World War II era, continues to evolve in today's market.

As the housing market navigates these changes, potential homebuyers and sellers alike will be closely watching economic indicators and policy decisions that could impact future trends in real estate.