Aug 22, 2023 - Economy

Brutal market for buyers: Home sales fall amid high rates, low inventory

Data: National Association of Realtors; Chart: Axios Visuals

Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes. That didn't change last month: Existing home sales slumped further in July.

By the numbers: Sales of previously owned homes fell 2.2% in July to an annualized rate of 4.07 million units, according to new National Association of Realtors data — the slowest pace of sales in six months. Compared to July 2022, existing home sales are down 16.6%.

What they're saying: "Two factors are driving current sales activity – inventory availability and mortgage rates," Lawrence Yun, chief economist at the National Association of Realtors, said in a release. "Unfortunately, both have been unfavorable to buyers."

Between the lines: The sales data is based on contract closings, where contracts were signed in late spring or early summer.

  • That means it doesn't reflect transaction activity since mortgage rates have surged higher: The average 30-year fixed-rate mortgage reached 7.48% on Monday, Mortgage News Daily said. That's the highest since late 2000.
  • "The average 30-year mortgage rate increased notably in July and has seen further increases so far in August, signaling likely slower sales ahead," Sam Millette, fixed income director at the Commonwealth Financial Network, wrote in a note.

What to watch: Previously owned homes continue to be in short supply — putting upward pressure on prices.

  • As of July, there was a little over three months' worth of supply available. That ticked a bit higher than June, but remains below the four months of supply available in the same period in 2019, before the pandemic.
  • The result is less affordability: The median price for an existing home in July was $406,700, nearly 2% higher than the same month in 2022.
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