Existing home sales fall 1.7% as mortgage rates near 6.7%

Higher borrowing costs are throttling US housing turnover, with existing home sales posting a second straight monthly decline in July.

Existing home sales fell 1.7 percent in July to a seasonally adjusted annual rate of 4.06 million, the second consecutive monthly decline, as the average 30-year fixed-rate mortgage climbed to 6.69 percent — the highest level since July 2025. Sales remained 0.7 percent above July 2025, and year-to-date transactions are up 2.4 percent from the same period last year, according to the National Association of Realtors.

"There's no doubt that the housing market would be thriving if average mortgage rates were to return near 6 percent," said Lawrence Yun, chief economist at the National Association of Realtors.

The July figures reflect contracts signed in May and June, when mortgage rates resumed their upward march after briefly pulling back. The average rate on the 30-year fixed-rate mortgage has jumped 71 basis points since the Middle East conflict began in February, according to Freddie Mac data. It averaged 6.54 percent in July, up from 6.49 percent in June, before reaching 6.69 percent in early August. Economists polled by Reuters had forecast home resales slipping to a rate of 4.05 million units, slightly below the actual reading.

Total unsold inventory fell 1.9 percent from June to 1.54 million units, a 4.6-month supply unchanged from both the prior month and a year earlier. The median existing home price rose 2.0 percent year-over-year to $434,100, marking the 37th consecutive month of annual appreciation. Higher mortgage rates are also discouraging homeowners with sub-5 percent fixed-rate mortgages from listing, keeping supply tight and prices elevated.

Regional divergence widens

Sales rose 2.0 percent in the Northeast to an annual rate of 500,000, with the median price up 5.2 percent year-over-year to $563,800. The West held steady at 730,000 units with prices up just 0.2 percent. The Midwest fell 2.0 percent to 970,000, while the South dropped 3.1 percent to 1.86 million — the largest monthly decline of any region. Yun noted that in smaller Midwest cities, a household income of $60,000 would be sufficient to qualify for a median-priced home, a level of accessibility largely absent from coastal markets.

First-time buyers retreat further

First-time buyers accounted for just 29 percent of July transactions, down from 33 percent in June and well short of the 40 percent share NAR associates with a healthy market. Cash buyers held at 26 percent of transactions, up from 25 percent in June, while investors accounted for 14 percent, slightly above the prior month. Homes spent 29 days on the market on average, up from 28 in June. Distressed sales, including foreclosures, were unchanged at 2 percent.

The Housing Affordability Index improved to 103.3 in July, up from 98.3 a year earlier, with gains across all four regions — the West led with a 7.3 percent improvement. Yet affordability gains have yet to translate into sustained transaction volume. Single-family sales fell 1.9 percent month-over-month to 3.69 million annualized, while condo and co-op sales were unchanged at 370,000.

The housing market's trajectory hinges on the mortgage rate path. If rates hold near current levels, the 4.6-month supply and near-record prices suggest continued stagnation in turnover. A return toward 6 percent — the level Yun identifies as the threshold for a thriving market — would require easing in the Middle East conflict and a cooling in inflation expectations that have kept long-term yields elevated since February. For homebuilders and mortgage lenders, the data points to a market where volume remains constrained even as prices hold firm, a dynamic that could persist through the fall selling season.

This article is for informational purposes only and does not constitute investment advice.