U.S. existing homes fall 1.7% in July as record prices, high mortgage rates stifle would-be buyers

The U.S. housing market experienced a further slowdown in July, with sales of previously occupied homes falling 1.7% from June to a seasonally adjusted annual rate of 4.06 million units. This figure slightly missed economists' expectations of 4.05 million units, though it represents a marginal 0.7% increase compared to the previous year.

Record high prices and the highest mortgage rates in over a year are creating significant hurdles for prospective homebuyers. The median sales price for existing homes rose 2% from July last year to $434,100. While June saw an all-time high median price of $442,800, prices have consistently increased year-over-year for 37 months.

The benchmark 30-year fixed mortgage rate climbed to 6.69% last week, marking the fifth consecutive weekly increase. This surge in borrowing costs adds further strain to the market. "It is difficult to find good news about the U.S. housing market from the July report," noted Carl Weinberg, chief economist at High Frequency Economics.

Weinberg explained that homeowners with low mortgage rates are reluctant to sell, exacerbating low inventory levels. The market has seen sales hovering near a 4-million annual pace for about three years, significantly below the historical norm of 5.2 million. At the end of July, 1.54 million homes were unsold, a 1.9% decrease from June, translating to a 4.6-month supply, which is below the 5-6 month supply considered balanced.

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No one who has a home already can afford to sell it. People with ultra-low COVID-era mortgages cannot afford to give them up. If no one is selling, no one can be buying, and inventories are low.