Real Estate News
Inventory is up and existing home sales have dropped, both variables that could be good news for buyers — but mortgage rates remain stubbornly elevated.
Key points:
- With mortgage rates still high and home sales slow, buyers may find more room to negotiate on prices.
- Persistent concerns about inflation and the job market are creating reluctance among buyers to move forward with a home purchase.
- Affordability is improving, but the window of opportunity may be short since inventory traditionally shrinks in the second half of the year.
This week was a busy one for economic data releases relevant to real estate. The big takeaway: Sluggish sales, slower price growth and solid inventory levels appear to be continuing the push toward a buyers market.
This phase of the market cycle is usually full of opportunity for buyers as sellers become more willing to negotiate on prices. But this year, it’s unclear whether demand will pick up as consumers remain concerned about inflation and the job market.
That uncertainty could be a factor even if mortgage rates were to drop in the coming months, according to Lisa Sturtevant, chief economist at Bright MLS.
In terms of 30-year mortgage rates, Sturtevant said that though “6% might seem to be a magic number for the housing market, there are a lot of other factors that are driving home buying and selling decisions in this shifting market.”
Mortgage rates nearly unchanged
For now, rates are still far from that “magic number.” This week, the 30-year fixed-rate mortgage averaged 6.74%, according to Freddie Mac. Though down a tick from last week’s 6.75% average, the rate has mostly hovered just under 7% for the past three months.
Economists expect rates to drop to around 6.4% by the end of the year, according to Fannie Mae’s July economic outlook — but for that to happen, inflation needs to remain subdued.
“The persistent risk of tariff-driven inflation, combined with a rising U.S. fiscal debt — expected to grow further following the passage of the Big Beautiful Bill Act — has helped establish a relatively high floor for interest rates, at least for now,” said Jiayi Xu, an economist at Realtor.com.
Affordability is improving
Despite these high borrowing costs, affordability has improved. The median monthly mortgage payment has dropped to $2,679, the lowest level in almost five months, according to Redfin’s rolling four-week report. For those who are ready to make a purchase, the report indicates it’s better to make an offer now before some negotiating power is lost as listings drop off later in the year.
Buyers should “keep an eye out for homes that have been on the market for over a month without a price drop,” advised Chaley McVay, a Redfin Premier agent in Portland, Oregon.
“Sellers may be willing to accept a lower offer rather than drop their price, especially if the seller is already under contract on their next home or needs to move out of town,” McVay said in a press release accompanying Redfin’s report.
June was tough for home sales
There weren’t many silver linings to be found in the existing and new home sales reports that came out this week.
Existing home sales fell 2.7% from May to June to a seasonally adjusted annualized rate of 3.93 million, according to the National Association of Realtors. The median price for homes that did sell was $435,300, up 2% year-over-year and the highest ever.
June’s existing home sales numbers were unchanged year-over-year — but 2024 was the slowest for existing home sales in 30 years. Meanwhile, June’s supply of unsold inventory was at 4.7 months, up from four months a year ago.
New home sales came in at a seasonally adjusted annual rate of 627,000 in June, down 6.6% from a year ago, according to the U.S. Census Bureau. This pushed new home inventory to 9.8 months — “the highest level since November 2022,” Sturtevant noted.
When combined with the existing home supply, overall inventory has pushed into the balanced market range, wrote Danushka Nanayakkara-Skillington, the assistant vice president for forecasting and analysis at the National Association of Home Builders (NAHB). The total supply has reached its highest level in a decade, according to an NAHB calculation based on Census Bureau and NAR data.
Mortgage applications continue to surprise
The one bit of good news for the market is the continued strength of mortgage application numbers. The unadjusted purchase index was up 4% for the week ending on July 18 compared to the previous week and 22% higher than the same week in 2024, according to the Mortgage Bankers Association (MBA).
Much of the weekly increase in applications was “driven by conventional purchase loans,” according to Joel Kan, MBA’s vice president and deputy chief economist.
While mortgage applications are up, so are contract cancellations as buyers use the leverage they have at closing.