The sales report for existing properties for July from the National Association of Real Estate Agents (NAR) has good news and bad news.
The good news is that existing home sales rose 1.3% month-over-month to a seasonally adjusted annual rate of 3.95 million, ending a four-month streak of declines. The bad news is that they are still down 2.5% compared to July 2023.
High mortgage rates and historically low inventory continue to drive up home prices. The average price rose 4.2% year-over-year to $422,600, marking the 13th consecutive month of annualized gains.
But as mortgage rates have fallen recently and home buyers expect The The US Federal Reserve to cut interest rates next month, the downward pressure on prices could boost the market this fall. Buyers already have more choice if and when they get back into the market, with inventories up 19.8% year-over-year.
“Despite the modest increase, home sales are still sluggish,” NAR chief economist Lawrence Yun said in a statement. “But consumers are definitely seeing more choices and affordability is improving due to lower interest rates.”
As home prices continue to rise, housing costs now account for the majority of inflation. According to the Consumer Price Index (CPI) for July, annual inflation fell to 2.9%, and stagnant price increases in other categories meant that home prices accounted for 90% of the monthly increase in the CPI.
Americans keep stressing that inflation will be a major issue in the 2024 election, so both presidential candidates are under pressure to come up with a plan to reduce housing costs.
Vice President Kamala Harris, the Democratic nominee, has laid out a detailed policy proposal. Her plan calls for building three million housing units by offering tax incentives to builders and providing first-time buyers with a $25,000 down payment.
The Republican platform also calls for encouraging first-time homebuyers through tax incentives, but Republican candidate Donald Trump’s campaign rhetoric is consistent with an issue he has placed at the center of his political career: illegal immigration. His campaign team claims that the presence of illegal immigrants is driving up housing demand.
Trump’s vice presidential candidate, JD Vance, has spoken more frequently on housing than Trump, although Vance’s comments predate his nomination. He repeated the Republican platform on the impact of immigration and criticized institutional investors.
While housing costs will almost certainly play a major role in the election, signals regarding mortgage rates give cause for optimism.
“Easing inflation helped accelerate the decline in mortgage rates in mid-July, and rates are currently near 15-month lows,” Realtor.com Chief economist Daniele Hale said in a statement. “This should bode well for buyers in the fall – a typically favorable time of year for homebuyers.”
