US existing home sales fall to three-month low in July as prices and rates squeeze buyers

The American housing market just reminded everyone that affordability math is still brutal. Existing-home sales dropped to a seasonally adjusted annual rate of 4.06 million units in July, a 1.7% decline from June and the lowest reading in three months, according to the National Association of Realtors.

The culprits are familiar: mortgage rates hovering well above 6% and a median home price that keeps climbing like it has somewhere important to be. At $434,100, the median existing-home price rose 2.0% from $425,700 a year ago, marking the 37th consecutive month of year-over-year price increases.

The numbers behind the squeeze

The average 30-year fixed mortgage rate sat at 6.54% in July. That’s a tick higher than June, though still below the 6.72% level recorded a year earlier.

First-time buyers felt the pinch acutely. They accounted for just 29% of July sales, down from 33% in June. That four-percentage-point drop in a single month is notable because first-time buyers have historically represented closer to 40% of the market in healthier conditions.

Cash transactions made up 26% of all sales. When more than a quarter of homes are purchased without a mortgage, it signals that well-capitalized buyers, often investors or downsizers sitting on equity, continue to hold a structural advantage over those who need financing.

Inventory offered little relief. Unsold homes totaled 1.54 million units at the end of July, translating to a 4.6-month supply. That figure actually dropped 1.9% from June and 0.6% from a year ago. A balanced market is generally considered to have about six months of supply, so conditions remain tilted toward sellers despite sluggish demand.

On a year-over-year basis, July sales edged up 0.7%, and year-to-date transactions are running 2.4% ahead of the same period last year.

Regional pockets of strength

NAR Chief Economist Lawrence Yun pointed to local dynamics as a reason the market hasn’t deteriorated further, specifically highlighting stronger demand in smaller Midwestern cities. Those markets tend to have lower price points and, consequently, more manageable monthly payments even at current rates.

Yun suggested the market could “flourish” if mortgage rates return near the 6% mark, indicating that even a modest rate decline could meaningfully shift buyer sentiment.

That 6% threshold matters because of how rate sensitivity works at the margin. The difference between a 6.54% rate and a 6.0% rate on a $350,000 mortgage translates to roughly $120 per month. For a buyer already stretching their budget, that’s the difference between qualifying and not qualifying.

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