What's Happening?
The National Association of Realtors (NAR) has reported a 2% increase in the sales of existing homes in July compared to the previous month. Despite this uptick, the estimated total of 4 million homes sold this year remains significantly lower than pre-pandemic levels. A notable development is the rise in housing inventory, which has reached its highest level since the 2020 lockdown, with 1.55 million units available for sale, marking a 16% increase from the previous year. This increase in inventory provides buyers with more options and negotiating power, although it poses challenges for sellers as homes are taking longer to sell. Additionally, home prices have softened in many markets, with declines observed in 33 of the 50 largest metro areas.
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Why It's Important?
The increase in housing inventory and slight rise in home sales are significant as they indicate a potential easing of the housing market's previous stagnation. For buyers, more inventory means greater choice and negotiating leverage, which could lead to more favorable purchasing conditions. However, sellers may face longer selling times and potentially lower prices. The current high mortgage rates, averaging around 6.6%, coupled with elevated home prices, continue to deter many potential buyers. The Federal Reserve's upcoming decision on interest rates could further influence mortgage rates, impacting affordability and market dynamics.
What's Next?
The Federal Reserve Board's meeting in mid-September may lead to a decision on interest rates, which could affect mortgage rates. If rates are lowered, it might encourage more buyers to enter the market. However, concerns about the U.S. debt and deficit could keep rates high. Joel Kan from the Mortgage Bankers Association forecasts that rates will remain around 6.6% through the end of the year, with potential changes next year. The easing of the 'lock-in effect,' where homeowners are incentivized to stay due to low mortgage rates, may lead to increased market activity.
