A
n aerial view of single-family homes in Miami shows the current state of the housing market. After mortgage rates surged three years ago, sales slowed down. According to the National Association of Realtors (NAR), existing home sales rose 2% in July compared to the previous month, with an estimated 4 million existing homes sold in the US this year - a significant drop from pre-pandemic levels.

    However, there are some positive signs: inventory is up, with 1.55 million units for sale in July, nearly 16% more than a year earlier. This increase gives buyers more options and leverage to negotiate. Prices are also softening in many markets, with a report by Realtor.com showing price drops in 33 of the 50 largest metro areas.

    The median home price nationwide was $422,400, up minimally from previous months. High prices and mortgage rates have deterred many buyers, but more listings may help. Mortgage rates are currently around 6.6%, and home prices have risen nearly 50% since before the pandemic. Even a small decrease in mortgage rates can help loosen the market.

    Recent weeks have seen a slight drop in mortgage rates, which has led to an increase in refinance activity among homeowners with high mortgage rates. This has allowed them to secure lower rates and reduce their monthly payments by hundreds of dollars.

    Economists expect opposing forces to influence mortgage rates in the coming months. The Federal Reserve Board's decision on interest rates may impact mortgage rates, but it's unclear whether a rate cut would lead to further drops. Some anticipate that current mortgage rates already factor in potential rate cuts, which could limit their effectiveness.

    The lock-in effect, where homeowners are hesitant to move due to low mortgage rates, is easing as more people put their homes on the market. This increase in inventory is a sign that some individuals are giving up those low rates and moving forward with their housing plans.

    New home construction data from the Census Bureau shows mixed results: housing starts were up 5% in July, but building permits decreased nearly 3%. The National Association of Home Builders attributes this to affordability challenges, labor shortages, and high regulatory costs.