Washington, D.C. – The real estate market showed surprising activity in July, with sales of previously owned homes rising by 2% compared to June, reaching 4.01 million units on a seasonally adjusted annual basis, according to the latest data from the National Association of Realtors. Analysts had anticipated a modest dip in sales, but year-over-year figures demonstrated a slight increase of 0.8% over July 2024.

The uptick in home sales likely reflects transactions initiated earlier this summer when mortgage rates fell. The average interest rate for a 30-year fixed mortgage briefly surpassed 7% in May and subsequently dropped to 6.67% by the end of June, offering potential buyers a glimmer of hope.

By the end of July, approximately 1.55 million homes were on the market, marking a significant 15.7% increase from the same month in the previous year. This inventory level corresponds to a supply that would last about 4.6 months at the current sales pace, indicating a market nearing equilibrium, where a six-month supply is generally considered balanced between buyers and sellers. However, while inventory levels are the highest since May 2020, they remain below pre-pandemic standards.

This growing inventory is easing some price pressures in the housing market. The median price for an existing home sold in July reached $422,400, a 0.2% increase from the same month last year, setting a record for July sales. Despite consistent annual price growth over the past 25 months, there are signs that the market may be shifting.

Lawrence Yun, chief economist for the National Association of Realtors, noted a slight improvement in housing affordability is stimulating home sales. “Wage growth is now outpacing home price increases, giving buyers more options,” he said, emphasizing a potential turning point for the market.

In addition, a particular surge in condominium sales has been noted in the South, a region experiencing declining prices over the past year. The luxury market has also seen robust activity, with homes priced over $1 million witnessing a 7.1% increase in sales year-over-year. In contrast, sales in the lower price ranges, specifically homes priced between $100,000 and $250,000, declined by 0.1%, while those under $100,000 dropped by 8%.

The average time it takes to sell a home increased, with properties selling in an average of 28 days in July, compared to 24 days the previous year. First-time homebuyers represented 28% of sales, a slight decrease from 30% in June and 29% historically in July 2024.

Investor activity has climbed, with those purchasing properties for investment purposes making up 20% of all transactions, up from 13% a year prior. This could be attributed to the rising supply of available homes and relatively high mortgage interest rates. The prevalence of all-cash buyers has also grown, accounting for 31% of transactions compared to 27% last year.

Yun remarked on this trend, noting, “This is an unusually high figure,” suggesting that wealth from stock or real estate investments may be influencing these purchasing decisions. With changing dynamics in the housing market, prospective buyers and investors alike are navigating a landscape marked by both challenges and opportunities.