US Home Sales Fall 1.7% in July as Mortgage Rates Rise

The National Association of Realtors (NAR) reported that existing-home sales in July totaled 4.06 million units, down 1.7% from the previous month. The decline is seen as a sign of a cooling housing market.

When mortgage rates rise, buyers face higher interest costs, which is a major factor discouraging purchases. Sellers also find it harder to secure a new home on good terms, which can make them less willing to transact.

US mortgage rates dropped below 6% at the end of February, just before the war with Iran began. Since the war started, however, they have climbed steadily. Last week, the average rate on the 30-year fixed-rate mortgage reached 6.69%, the highest level in a year. These rate increases are adding to the instability of the housing market.

The US housing market remains cool, with transaction volume continuing to shrink. Homeowners who bought with low-rate loans are reluctant to trade up to a new home. Home prices that rose sharply over a short period have also strained potential buyers, making them hesitant to purchase.

The strain falls particularly on the middle class, and the issue is being raised as pressure on ordinary household economies. These property tax increases are reducing the economic appeal of homeownership.

However, this increase is smaller than the rate of inflation. When home price growth trails inflation, it suggests the housing market has lost momentum and become less attractive compared with the broader economy.

Home prices have risen on a year-over-year basis for 37 consecutive months, yet the gains are modest, and skepticism is spreading about whether investing in housing is wise. This skepticism suggests capital may move toward more liquid assets such as stocks. It reflects the relatively diminished appeal of the housing market as investors seek higher returns elsewhere.