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    The latest home sales data from the National Association of Realtors shows a mixed picture for the real estate market. While sales were down 2.5% year over year in July, they increased by 1.3% compared to the previous month, indicating a possible shift in trends. However, this data is a month behind, so it doesn't provide an accurate picture of the current market situation.

    The National Association of Realtors had forecasted a 13.5% increase in sales at the end of last year, based on the assumption of falling mortgage rates. However, this estimate appears to be overly optimistic as the July existing home sales report showed a decline in sales.

    Mortgage rates shot up to as high as 8% at the end of 2023. Lawrence Yun, Chief Economist of the National Association of Realtors, believes that a 6% rate for a 30-year-fixed mortgage could be the new normal. However, we are still about half a percentage point away from this target, as the latest Freddie Mac Primary Mortgage Market Survey came in at 6.46%. Despite a few positive weeks, recent data from the Mortgage Bankers Association showed a drop of over 10% in mortgage applications week over week. This could be temporary due to seasonality or a sign that buyers are waiting for the Fed's next move in September, expecting rates to go lower.

    Even at a 6% rate, homes are still more expensive than they were a year ago. The median existing-home sales price in July was $422,600, which was an over 1% drop from last month but a 4.2% increase year over year. Logan Mohtashami, lead analyst at Housing Wire, believes that lower rates alone won't be enough to move the needle for existing homes. He thinks it will take a rate of 4% to 6% to create a significant sales shift.

    The difference between a buyer's and seller's market comes down to inventory. Higher inventory theoretically leads to lower prices. In July, inventory increased by 0.8% to a four-month supply, moving closer to the six-month supply needed for a balanced market. More homes for sale will eventually bring down prices over time, but there's often a lag between what a buyer thinks a house should cost and what it sells for. Therefore, price cuts are something to keep an eye on. Zillow's July data showed that 26% of homes on their site had a price chop, which could be a sign of things evening out.

    Low inventory still gives homebuilders an advantage. On Toll Brothers' second-quarter earnings call, CEO Doug Yearley highlighted the advantage his company has due to low inventory. He believes that lower interest rates alone won't fully address the chronic undersupply of housing.

    National numbers don't provide a complete picture of individual markets. However, they do offer a glimpse into an existing home sales market that needs something significant to shift beyond its current situation. Lawrence Yun described the current market as 'sluggish,' a fitting description for the wait-and-see state of things.

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