U.S. existing home sales rose more than expected in July, reversing four straight monthly declines, as improving supply and falling mortgage rates offered hope that activity could pick up in coming months.
Home sales rose 1.3 percent last month to a seasonally adjusted annual rate of 3.95 million units, the National Association of Realtors reported on Thursday. Economists polled by Reuters had forecast home resales would rise to a rate of 3.93 million units.
Home resales, which account for a large portion of U.S. sales, declined 2.5% year-over-year in July. The median existing home price rose 4.2% from a year earlier to $422,600. Home prices rose in all four U.S. regions.
Home resales are counted at the closing of a contract. July sales likely reflected contracts signed in the previous two months, when the average rate on the popular 30-year fixed-rate mortgage was around 7%.
The average rate on a 30-year fixed-rate mortgage stood at 6.49 percent last week, near a 15-month low and more than half a percentage point below the same period last year, according to data from mortgage lender Freddie Mac.
It has eased from a six-month high of 7.22% hit in early May amid signals from the Federal Reserve that a long-awaited interest rate cut will come in September.
“Despite the modest increase, home sales remain sluggish,” said Lawrence Yun, NAR’s chief economist. “But consumers are definitely seeing more options, and affordability is improving due to lower interest rates.”
Sales rose 1.1% in the densely populated South. They were unchanged in the Midwest, considered the most affordable region. Sales advanced 4.3% in the Northeast and rose 1.4% in the West.
Housing inventory rose 0.8% to 1.33 million units last month. Supply was up 19.8% from a year ago.
Rising insurance premiums across the country, due to an increase in weather-related claims, are forcing some homeowners to put their properties on the market.
But the supply of starter homes remains tight and there is not enough new construction. The government reported last week that single-family home construction fell in July to its lowest level in 16 months, likely weighed down by Hurricane Beryl and an oversupply of new homes, while permits for future construction also declined. Many homeowners have mortgage rates below 5%.
At July’s sales pace, it would take four months to exhaust the current inventory of existing homes. That’s up from 3.3 months a year ago. A four- to seven-month supply is considered a healthy balance between supply and demand.
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