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By Giulia Carbonaro
Senior Reporter
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Existing home sales ticked higher in July on both a monthly and annual basis, surprising experts after a disappointing June that confirmed that the country's housing market is facing a slowdown.
Slight improvements in affordability has helped the number of existing homes sold in July to climb 2 percent from a month earlier and 0.8 percent from a year earlier to a seasonally adjusted annual rate of 4.01 million, according to the National Association of Realtors (NAR).
But experts commenting on the data say that this small boost in sales cannot be interpreted as a sign that the country's housing market is out of its current slump—which they expect to last.
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What's Behind the Increase in Existing Home Sales
The U.S. housing market is currently in a deep freeze as inventory has surged in recent months without demand, crippled by affordability issues, being able to keep up. According to a recent report by Redfin, there are over 500,000 more sellers than buyers in the market, an imbalance that is leading to softening prices, especially in those areas of the country that have seen the biggest increases in listings.
Higher inventory is moving the market in favor of buyers, who are acquiring more negotiating power and are now able to force sellers to slash prices to close a deal. While median existing home sale prices still rose by 0.2 percent in July compared to a year earlier, reaching a total of $422,400, this was the slowest pace of growth reported in years.
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Mortgage rates, which have been hovering around the 7 percent mark for months now, have also fallen recently, even if modestly. The 30-year fixed-rate mortgage was 6.58 percent as of the week ending August 14, according to Freddie Mac, the lowest level since October.
"Mortgage rate stability was likely a welcome trend for homebuyers who have seen their purchasing power erode by nearly $30,000 as mortgage rates climbed over the last few years," Realtor.com's chief economist, Danielle Hale, said in a statement shared with Newsweek.
"The recent stability gives incomes, which have continued to rise in most markets, a chance to catch up," she said.
This "ever-so-slight improvement" in housing affordability is helping boost home sale, according to NAR Chief Economist Lawrence Yun. "Wage growth is now comfortably outpacing home price growth, and buyers have more choices. Near-zero growth in home prices suggests that roughly half the country is experiencing price reductions," he said in a press release.
According to Yun, homebuyers in the U.S. are now in the best position in more than five years to "find the right home and negotiate for a better price," as inventory is at its highest level since May 2020, though still below pre-pandemic levels.
What It Means for the US Housing Market
Experts are cautious of seeing this positive bit of data as a sign that the U.S. housing market's slump may come to an end soon.
"Despite today's slight uptick in sales, year-to-date non-seasonally adjusted sales are still tracking 1.3 percent below last year," Bright MLS Chief Economist Lisa Sturtevant said in a comment shared with Newsweek.
For Sturtevant, the fact that sales are still tracking below last year despite buyers' growing power over sellers is a sign that the former are still being held back by other affordability challenges.
"Mortgage rates have been in the high 6 percent range and the median home price hit a new record high earlier this summer. There are simply fewer would-be buyers out there who can afford to buy in this market," she said.
What the housing market needs to get out of its current slump is "a drop in mortgage rates and a slowdown in price growth—or even a drop in home prices—to bring more buyers into the market," Sturtevant said.
Most experts are expecting mortgage rates to fall later in the year, as the Federal Reserve is considered very likely to cut rates in September.
"This rate dip will not be enough to unlock the vast majority of homeowners, who continue to enjoy sub 6 percent rates, but it will help those on the margins and may lead to a more active fall home sales season," Hale said.
But there are other factors, including rising consumer anxiety and consumer debt, that remain headwinds to the market heading into the fall, Sturtevant said.
"Unfortunately, there is no quick solution to jump start housing market activity," she said. "Over the next 12 months, inventory likely will continue to increase and rates should come down. Price growth will slow and prices likely will fall year-over-year in some markets."
"Affordability should improve and more buyers should be able to get into the market. So, 2026 will still very much be a transition year for the housing market."
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