Existing home sales increase in July

Summary

A drop in mortgage rates sparked buyer interest in July

Existing home sales rose 1.3% in July, the first improvement in five months. This modest uptick was likely owed to a slip in financing costs the prior month. The 30-year fixed mortgage rate averaged 6.9% in June according to Freddie Mac, down from 7.1% in May. That said, resales are moving at a sluggish pace as elevated mortgage rates remain a prohibitive expense for buyers. Firm price appreciation is also adding to the affordability challenge. The median single-family resale price rose 4.2% annually in July, an acceleration from June's 4.1% growth rate. According to the National Association of Realtors, homebuyers in Q2-2024 needed household incomes of at least $108,600 to qualify for the median priced resale home, up from $57,888 in 2021. Single-family inventories, meanwhile, continue to grow. After seven consecutive monthly expansions, the count of homes for resale in July rose nearly 22% above its level one year ago.

Mortgage rates have retreated further in recent weeks as markets anticipate the Fed to start easing policy in September. The average 30-year rate dipped below 6.5% the first week of August, reaching its lowest level in 15 months. This downtrend may result in further bumps to existing home sales in the coming months. Yet as explored in our latest housing market outlook, affordability conditions are unlikely to improve drastically, and slowing job and income growth will likely limit the potential for a full-fledged housing market recovery. We expect mortgage rates will continue to decline once the Fed starts cutting interest rates this fall, however we do not forecast that they will dip much lower than 6.0% by the end of next year.

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