For one, growth in stock market wealth and housing wealth were major contributors to the large July gain in home sales. Lawrence Yun, the Chief Economist for the National Association of Realtors, points to a recent increase in sales. Indeed, he credits this healthful trend largely to the stabilization of the affordability of housing. Nationally, the median price of an existing home in July reached an all-time high of $422,400. That is 0.2% higher than last year in the same month.
At the end of June, the average rate on the 30-year fixed mortgage was 6.67%. This came in the wake of a short-lived increase in May, when mortgage rates eclipsed 7%. This slight dip in mortgage rates, combined with rising wages that are outpacing home price growth, has given potential buyers more confidence in the market. Yun said that one of the most important economic indicators.
“Wage growth is now comfortably outpacing home price growth, and buyers have more choices,” – Lawrence Yun.
First-time homebuyers made up 29% of sales in July, down from 30% in June. Even with this decrease, first-time buyers still account for a substantial share of the active market. At the same time, investors made up 13% of transactions in July, a decrease from 20% earlier this year.
Perhaps the most healthy sign, the inventory of homes for sale has more than doubled. In July, those homes represented an inventory of 1.55 million homes on the market. This new record marks a 15.7% increase over the previous year in October. Perhaps more importantly, it’s the furthest peak we’ve observed since May 2020. Still, that is far short of pre-COVID levels, demonstrating continued difficulty in keeping pace with buyer demand.
The double whammy of higher inventory and modestly better affordability have fueled the most frenzied activity in the housing market since early 2022. Yun noted that this new trend could help increase existing home sales. Potential reasoners, buyers and implementers will be more inspired to make their buying choices.
“The ever-so-slight improvement in housing affordability is inching up home sales,” – Lawrence Yun.
That’s why analysts are watching the rapidly changing market with bated breath. Keep an eye out as they monitor how these trends will drive buyer behavior and sales numbers in the months ahead. The dynamics between inventory levels, mortgage rates, and buyer demographics will be critical to understanding future developments in the housing market.