US Existing Home Sales Slide Again as High Mortgage Rates Keep Buyers on the Sidelines

The US housing market continues to face pressure as elevated mortgage rates, high property prices and limited availability of affordable homes weigh on buyer activity. Existing-home sales declined for a second consecutive month in July, highlighting the difficulty the market is facing in generating a stronger recovery.

According to the latest housing data, sales of previously owned homes fell 1.7% in July to a seasonally adjusted annual rate of 4.06 million units. The result was slightly below the pace economists had expected. Despite the monthly decline, sales remained 0.7% above their level a year earlier, while sales during the first seven months of the year were up 2.4% from the corresponding period last year.

Mortgage Rates Remain a Major Barrier

Borrowing costs remain one of the biggest obstacles for prospective homeowners. The average rate for a 30-year fixed mortgage recently reached 6.69%, its highest level in more than a year.

For buyers, even a modest change in mortgage rates can significantly alter monthly payments and overall affordability. The recent rise has therefore encouraged many households to postpone purchases while they wait for financing conditions to become more favorable.

The impact is also being felt on the supply side. A large number of existing homeowners locked in mortgage rates below 5% during the pandemic. Selling their current properties would often mean replacing those inexpensive loans with substantially more expensive financing. That incentive to stay put has restricted the number of homes coming onto the market.

Affordable Homes Remain Particularly Scarce

The shortage of reasonably priced properties is creating an additional challenge for households trying to enter the market.

Sales of homes priced at $250,000 or less remain weak, reflecting the limited supply of starter homes. At the same time, properties priced at $750,000 and above recorded double-digit growth in sales.

This divergence illustrates how uneven the housing market has become. Higher-income buyers are generally better positioned to absorb elevated borrowing costs, while households with tighter budgets face a combination of expensive financing and a shortage of entry-level properties.

Inventory Falls Despite Weak Sales

The supply picture has not improved significantly. Existing-home inventory declined 1.9% in July to approximately 1.54 million units. That was also 0.6% below the level recorded a year earlier.

At the current sales rate, the available supply represents about 4.6 months of inventory, unchanged from June and from the same period last year.

The limited inventory means buyers may have fewer choices even as affordability remains stretched. It also reduces the likelihood of a rapid correction in prices, particularly in markets where housing supply remains constrained.

Home Prices Continue to Rise

Despite sluggish transaction volumes, home prices have continued to move higher. The median existing-home price increased 2% from a year earlier to $434,100 in July.

That figure was below the recent record of $440,600, but the annual increase extended the market's streak of year-over-year price gains.

The combination of rising prices and mortgage rates presents a difficult equation for buyers. Although an improvement in affordability compared with a year earlier has been reported, the lack of lower-priced homes and elevated financing costs continue to limit access to homeownership.

First-Time Buyers Under Pressure

First-time buyers represented just 29% of existing-home purchases in July, down from 33% in June. The figure was only slightly higher than the year-earlier share of 28%.

The relatively small contribution from first-time purchasers remains a concern because new buyers are an important component of a healthy housing market. The National Association of Realtors has indicated that a share closer to 40% would be more consistent with stronger market conditions.

Homes also stayed on the market slightly longer. The median time increased to 29 days in July from 28 days in June. Distressed transactions, including foreclosures, accounted for 2% of sales, unchanged from the previous month.

Regional Performance Remains Uneven

Housing activity varied considerably across the country. Existing-home sales increased in the Northeast, while the West recorded little change. Sales declined in both the Midwest and South.

The South remained the largest regional market by sales volume, with an annualized pace of about 1.86 million units. The Northeast recorded an annualized pace of roughly 500,000 units.

The mixed regional results suggest that local housing conditions, affordability and supply are playing an important role alongside national mortgage-rate trends.

Recovery Still Depends on Affordability

The latest figures show that the US housing market has made some progress compared with last year, but a sustained recovery remains difficult while borrowing costs stay elevated.

Residential investment did rebound in the second quarter after five consecutive quarters of decline, offering a positive signal for the broader housing sector. However, affordability continues to constrain demand.

Existing-home sales have also remained below an annual rate of 5 million units for roughly four years, underscoring the prolonged nature of the market slowdown.

A meaningful decline in mortgage rates could provide relief by improving purchasing power and potentially encouraging homeowners with older, cheaper mortgages to list their properties. Until then, both buyers and sellers are likely to remain cautious, leaving the US resale housing market in a period of subdued activity.