July Home Sales Fell After Higher Mortgage Rates Scared Off Buyers

Home sales fell in July, getting the summer off to a poor start after the housing market suffered through another sluggish spring selling season.

Sales of existing homes declined 1.7% in July over the previous month to a seasonally adjusted annual rate of 4.06 million, the National Association of Realtors said Tuesday.

The rise in mortgage rates following heightened tensions in the Middle East continued to put off home buyers. Sales in July came in below expectations. Economists surveyed by The Wall Street Journal had forecast a decline of 1%.

The national median existing-home price in July rose 2% from a year earlier, to $434,100, NAR said. That is the second-highest median price on record, just below $442,800 in June.

The Mideast conflict has stymied the housing market in a year the real-estate industry was optimistic would bring a rebound in home sales following years of stagnation.

Mortgage rates briefly fell below 6% in February, but jumped with the beginning of the Iran war, and have continued to creep up as hopes for a clean end to the conflict have faded.

The 30-year fixed-rate mortgage averaged 6.69% last week, the fifth consecutive week of increases, after averaging 6.43% at the start of July, according to Freddie Mac.

Many homeowners benefiting from low rates from years ago have opted to stay put to maintain their rates, which has dragged down available inventory. NAR said unsold inventory in July fell 1.9% from June to 1.54 million units.

The slowdown in sales marks a continuation from June, when home sales fell 1.4%.

Economists don’t expect rates to fall soon, with geopolitical conflict as well as spending on the artificial-intelligence build-out fueling inflation.

Yet high rates may not be the deterrent that they used to be for everyone, economists say. The pent-up demand for housing has caused some potential home buyers to lose patience, even with high mortgage rates and an uncertain economy.

“Home sales have been remarkably stable, even amid the rising mortgage rate environment of the past few months,” said NAR Chief Economist Lawrence Yun.

Despite the month-over-month decline, July home sales ticked up 0.7% from a year ago.

“There is no reason to think that mortgage rates are gonna come back down again. So they’re just saying I have to get on with my life and that’s what they’re doing,” said Brad Case, chief residential economist at Homes.com. “So it’s not that the market is strong, but it’s a lot stronger than I thought it was based on the increase in mortgage rates.”

Sam Harris and his wife stomached a high mortgage rate to close on a house in Georgia in April. Upon getting the mortgage estimates, “my mouth just dropped open,” he said. “It was just kind of a shell shock for me looking at those numbers. I’m like, ‘I thought this would be way more affordable.’”

But Harris was intent on buying even so.

“We were absolutely against renting a place. We just have to take this in stride, kind of bite the bullet on the higher rate. Maybe one day rates will go down enough to make refinancing worth it,” he said.

Home buyers in today’s market also have to endure an unstable economy, with weak consumer sentiment weighing on Americans’ willingness to undertake large purchases. Harris, who works in IT, had been laid off from his previous job and had been worried about it happening again.

“We’ve wanted to buy a house for a long time, but then there’s always these talks of layoffs and AI taking over and the white-collar sector contracting,” he said. “I was scared of losing my job again, or just the general direction of the economy…But at the same time, it seems like the best time to buy a house was always yesterday.”