In what could be promising signs for the fall market, existing home sales increased 2% in July and mortgage rates are holding steady at 10-month lows.<\/p>\n
Key points:<\/p>\n
The latest economic data shows a slight improvement in real estate activity \u2014 but what remains to be seen is whether this is the start of a trend or a momentary blip in an otherwise sluggish year for the housing market<\/a>.<\/p>\n Existing home sales were up 2% in July compared to June and up 0.8% year-over-year, bumping the seasonally adjusted annual rate up to 4.01 million, according to the National Association of Realtors. The median sales price was basically flat year-over-year, rising 0.2% to $422,400.\u00a0<\/p>\n The near-zero growth in home prices suggests that roughly half of the country is experiencing price reductions, NAR Chief Economist Lawrence Yun noted. “The ever-so-slight improvement in housing affordability<\/a> is inching up home sales,” he said in an Aug. 21 press release<\/a>.<\/p>\n “Wage growth is now comfortably outpacing home price growth, and buyers have more choices. Condominium sales increased in the South region, where prices had been falling for the past year,” Yun said.<\/p>\n Some stability for mortgage rates<\/p>\n It was a quiet week for mortgage interest rates, which held at 10-month lows<\/a>. The weekly average for the 30-year fixed-rate mortgage was 6.58% as of Aug. 21 \u2014 the same as the week before, according to Freddie Mac<\/a>.<\/p>\n Lower mortgage rates and slower price growth \u2014 or even year-over-year price drops \u2014 are needed to bring more buyers into the market, according to Lisa Sturtevant, chief economist at Bright MLS.<\/p>\n With the Federal Reserve’s possible September cut in short-term interest rates already appearing to be priced in by investors, Sturtevant believes rates may not drop much more in 2025.<\/p>\n “But inventory is expected to grow and sellers are starting to reset price expectations, setting the stage for more buyer opportunities in 2026,” she said.<\/p>\n Some clarity on rate cuts may come on Aug. 22 when Fed Chair Jerome Powell delivers his annual Jackson Hole speech in Wyoming. Ahead of his anticipated remarks, Federal Reserve Bank of Atlanta President and CEO Raphael Bostic said he expects one rate cut<\/a> in the final months of 2025.<\/p>\n Even if rates don’t fall much more this year, buyers did see a gain of about $20,000 in purchasing power since the rate peak in May, noted Chen Zhao, head of economics research at Redfin.<\/p>\n Buyers and sellers hesitate amid economic worries<\/p>\n Uncertain economic conditions continue to rattle potential buyers. Redfin data published on Aug. 21<\/a> indicates 15.3% of home agreement contracts were canceled last month \u2014 the highest rate for July since the brokerage began tracking contract cancellation data in 2017.<\/p>\n The reason? High prices, high mortgage rates and economic uncertainty are making buyers uneasy, according to Redfin data journalist Lily Katz. Since more inventory means buyers also have more choices, a greater share are backing out during the inspection period if they spot a better home or discover an issue they don’t want to fix.<\/p>\n Finding out the monthly mortgage payment during closing may also be giving buyers sticker shock. The National Association of Home Builders’ second quarter housing cost index<\/a> found that a family earning the country’s median income of $104,200 needed to use 36% to cover the monthly payment on a median-priced new home and 37% for an existing home.<\/p>\n Many financial experts<\/a> recommend households spend no more than 28% of their gross monthly income on their mortgage. Though still well above that recommended share, the current level has dropped from a couple of years ago, when households were spending close to 40%.<\/p>\n Hints of buyer interest remain<\/p>\n Even so, the purchase application volume is well ahead of last year’s pace, suggesting prospective buyers are still active heading into the fall, noted MBA Vice President and Deputy Chief Economist Joel Kan.<\/p>\n Home prices could rise<\/p>\n Inventory will be key in determining whether affordability improves for buyers \u2014 and new listings have slowed significantly as sellers wait for demand to improve.<\/p>\n