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Overview
As the market transitions into the third quarter, mortgage rates remain below the 7% mark. In July, home sales saw an uptick, stopping a four-month decline that began in March 2024. On a regional level, three out of the four U.S. regions registered sales increases while the Midwest remained steady. As a result, the median sales price has increased by 4.2% year-over-year and all four regions reported higher prices.
Demographic trends and job growth have sustained strong market demand, but the current housing supply is struggling to keep up. Despite that, consumers are starting to see more choices, and affordability could improve soon as interest rates go lower.
July CPI reached 2.9%, getting closer to the Federal Reserve's target rate of 2%. NAR expects that calmer inflation will prepare the grounds for the rate-cutting process to begin in September. Overall, with the treasury yield continuing its decline trend, the market is presenting favorable conditions for borrowers. If mortgage rates keep declining after the summer, the housing market is expected to gain momentum in the following months.
The Federal Reserve maintained its short-term interest rate at 5.5% in July, unchanged since August 2023. A further slowdown of inflation expected in the following months may enable the Fed to cut rates as soon as in September. The Fed aims to reduce inflation to its 2% average target.
The U.S. labor market rose by 114,000 in July, which is still slower than the average monthly gain of 215,000 over the past 12 months. The same month employment continued to trend up in health care, construction, and transportation and housing, while the information industry lost jobs.
Inventory has been consistently increasing since the beginning of the year. In July, total housing inventory was 1.33 million units, up 0.8% from June and 19.8% from one year ago. However, even with this increase, demand continues to outpace housing supply, leading to rising home prices.
