US existing home sales dropped 1.7% in July to a seasonally adjusted annual rate of 4.06 million units, marking the second consecutive monthly decline as mortgage rates climbed toward their highest level in a year. Yet prices kept rising anyway: the median existing home price increased 2.0% from a year earlier to $434,100, extending a streak of year-over-year price growth to 37 straight months. The split between falling sales and rising prices captures a housing market still squeezed by a persistent inventory shortage even as fewer buyers can afford to close deals.
The National Association of Realtors, in a report cited by Reuters, said the July decline came in slightly better than economists had expected. A Reuters poll of economists had forecast home resales falling to a rate of 4.05 million units, so the actual print of 4.06 million landed just above that estimate. NAR also revised its June 2026 pace upward, from an initially reported 4.09 million to 4.13 million units, according to CalculatedRisk, meaning the summer slowdown started from a stronger base than first thought.
Mortgage Rates Keep Climbing Toward 6.7%
The freeze traces back to borrowing costs. The average 30-year fixed mortgage rate averaged 6.69% last week, according to Freddie Mac data cited in the Reuters report, its highest level since July 2025. Rates had briefly pulled back in May before resuming their upward trend, per the same reporting, and Freddie Mac figures show the 30-year rate has jumped 71 basis points since the war started in February. Higher rates worsen the underlying housing shortage in two ways: they discourage some homeowners from selling, since many are sitting on fixed-rate mortgages below 5%, while simultaneously pricing out prospective buyers who need financing.
NAR Chief Economist Lawrence Yun, quoted in the Reuters account, said the housing market would be thriving if average mortgage rates returned near 6%. That comment underscores just how much of the current slowdown NAR attributes directly to financing costs rather than a lack of buyer interest. July's sales figures, since existing home sales are counted at the closing of a contract, likely reflected deals signed back in May and June, according to Reuters, meaning the numbers lag the market's real-time mood by roughly two months.
Inventory Still Tight Despite the Sales Slump
Existing housing inventory decreased 1.9% to 1.54 million units and was down 0.6% from a year earlier, according to the Reuters report on the NAR data. At July's sales pace, that supply would take 4.6 months to exhaust, an exhaustion timeline that was unchanged from both June and a year ago. Median days on market for listed properties edged up slightly to 29 days, from 28 in both June and a year earlier, suggesting properties are sitting only marginally longer before selling.
First-time buyers accounted for 29% of July sales, rising from 28% a year ago but falling from 33% in June, per the Reuters figures. Yun has said a healthy, robust housing market needs a first-time buyer share closer to 40%, so the current level remains well short of that benchmark despite the modest year-over-year gain. All-cash buyers, meanwhile, accounted for 26% of existing home sales in July, according to REALTOR Magazine, maintaining roughly a quarter of all transaction volume as equity-rich repeat buyers and investors continue sidestepping mortgage costs altogether. Distressed sales, including foreclosures, held unchanged at 2%, per the Reuters report.
Sharp Regional Divides Emerge
Regional trends diverged sharply in July. Sales rose in the Northeast, were unchanged in the West, and fell in the Midwest and South, according to Reuters. REALTOR Magazine's breakdown of NAR data shows median prices ranged from $342,900 in the Midwest, up 2.8% year-over-year, and $371,700 in the South, up just 0.9%, to $563,800 in the Northeast, up a striking 5.2%, and $622,200 in the West, up only 0.2%. The Northeast's combination of rising sales volume and the sharpest price growth stands in contrast to the Midwest, which remains the most accessible region for middle-income buyers. Yun has pointed out that an annual household income of $60,000 is sufficient to purchase a median-priced home in smaller Midwestern cities, a benchmark that looks increasingly out of reach in the coastal markets.
Nationally, existing home sales increased 0.7% year-over-year in July even after the two-month slide, and NAR data shows total sales through July remained up 2.4% year-to-date compared to the same seven-month stretch in 2025. Sales of previously occupied homes continue to hover near an annual rate of 4 million, a pace that remains well below the historical U.S. norm of roughly 5.2 million annual transactions, according to The Washington Post. That gap illustrates how far the market remains from a full recovery even as year-to-date totals tick upward.
Affordability Improves, but New Construction Undercuts Existing Prices
There is one bright spot buried in the data. The national Housing Affordability Index reached 103.3 in July, up from 98.3 a year earlier, as wage growth outpaced home price gains across all four U.S. regions, according to figures reported by Mortgage Professional America. An index reading above 100 signals that a median-income family earns enough to qualify for a mortgage on a median-priced home, meaning purchasing power modestly improved year-over-year even with elevated rates. The same outlet's data shows single-family home resales fell 1.9% month-over-month to 3.69 million units at a median price of $440,300, while condo and co-op sales held steady at 370,000 units with a median price of $371,800.
New construction is quietly grabbing market share by undercutting existing home prices. U.S. Census Bureau estimates put new single-family home sales at a seasonally adjusted annual rate of 628,000 units in June, with a median sales price of $398,300, down 2.7% year-over-year. That figure sits notably below the $434,100 median for existing homes, reflecting builder incentives and financing concessions that make new construction comparatively more attainable even as resale prices keep climbing. Hoodline previously reported that a $110K income is still needed to buy a home nationally, underscoring how uneven affordability remains across the existing and new-construction markets alike.
