U.S. Existing Home Sales Fell 1.7% in July Amid Affordability Concerns

Existing home sales in the U.S. decreased by 1.7% in July, reaching a seasonally adjusted annual rate of 4.060 million units. This figure nearly matched the consensus expectation of 4.050 million and represents a modest 0.7% increase compared to July of the previous year. The dip in sales activity primarily reflects persistent affordability challenges within the housing market, exacerbated by a recent upturn in mortgage rates.

The decline in July was observed in the South and Midwest regions, while sales remained unchanged in the West and saw an increase in the Northeast. Critically, the overall reduction in sales was entirely attributable to single-family homes, with sales of condominiums and co-operative units holding steady during the month. The median price for an existing home, not seasonally adjusted, fell to $434,100 in July, though it remains 2.0% higher than a year ago.

The housing market has largely stagnated around the 4.060 million annual sales pace for the past three years. This level is comparable to the sales activity seen in the aftermath of the Great Financial Crisis and significantly below the pre-COVID pace of approximately 5.250 million units per year, let alone the 6.500 million pace observed during the pandemic. A primary factor hindering sales is diminished affordability, which has worsened following recent geopolitical events that have pushed energy costs higher, contributing to short-term inflation.

This inflationary pressure has led to a rapid increase in 30-year fixed mortgage rates, which have climbed approximately 70 basis points since February to around 6.8%. Higher inflation also reduces the likelihood of near-term interest rate cuts from the Federal Reserve. However, there are some positive developments for potential buyers. The “mortgage lock-in” phenomenon, where homeowners are reluctant to sell due to previously securing much lower mortgage rates, has begun to ease. Consequently, existing home inventory is approaching its highest level since the pandemic, though it still trails pre-COVID figures.

Furthermore, the months' supply of homes — a measure of how long it would take to sell all available inventory at the current sales pace — was 4.6 in July. This figure is approaching the 5.0 benchmark, which typically indicates a balanced market. While the median home price remains near record highs, its annual growth rate of 2.0% has been consistently outpaced by aggregate wage growth (hourly earnings plus hours worked) since early 2025. This trend offers a gradual improvement in affordability. Despite various market crosscurrents, a widespread collapse in the housing sector appears unlikely, with foundational elements emerging for a modest recovery in home sales.

Key terms:

1. Existing Home Sales: The number of previously owned homes, including single-family homes, townhouses, condominiums, and co-ops, for which contracts closed during a specific month. It is reported as a seasonally adjusted annual rate, meaning the monthly data is adjusted for typical seasonal variations and multiplied to represent a full year of sales at that pace.

2. Median Price: The middle value of all home prices in a given period, where half the homes sold for more and half sold for less. It is often used instead of the average price to minimize the impact of extremely high or low-priced sales.

3. Months' Supply of Homes: An estimate of how long it would take for all currently available homes for sale to be sold, given the current rate of sales. A higher number indicates an oversupply of homes relative to demand, while a lower number suggests a tighter market. A 5.0 months' supply is often considered indicative of a balanced market between buyers and sellers.

Source: This article is adapted from First Trust Portfolios' Data Watch commentary on this data release. The original is available at ftportfolios.com.