Sales of homes in the United States ticked down in July, according to industry data released Tuesday, as elevated mortgage rates and limited housing supply held buyers back.
The housing market in the world's biggest economy has been reeling as interest rates climbed, making home owners reluctant to put their properties up for sale -- having earlier locked in lower rates on their mortgages.
Existing home sales edged down 2.2 percent last month to an annual rate of 4.1 million, seasonally adjusted, said the National Association of Realtors (NAR).
The figure, which was below expectations, remains the lowest rate since January.
Sales have fallen 16.6 percent from a year ago, said the association.
"Two factors are driving current sales activity –- inventory availability and mortgage rates," said NAR chief economist Lawrence Yun in a statement.
"Both have been unfavorable to buyers," he added.
Sales of existing homes "likely have further to fall over the rest of the year as higher mortgage rates and a mild recession squeeze demand and keep supply conditions tight," said economist Michael Pearce of Oxford Economics.
While inventory rose "marginally" in July, it stands at a historically tight figure, he said.
With housing inventory still 14.6 percent lower than the same period a year ago, the median sales price for existing homes remained high at $406,700.
This was 1.9 percent above July 2022, said NAR.
- Disconnect in rates -
In August, US mortgage rates hit their highest level in more than two decades.
The popular 30-year fixed-rate mortgage averaged nearly 7.1 percent as of August 17, up from the prior week according to home loan finance company Freddie Mac.
There is a "disconnect between the current mortgage rate and the much lower average rate on outstanding mortgages," said economist Kieran Clancy of Pantheon Macroeconomics.
This means people cannot move without triggering a major jump in monthly payments.
"The gridlock will only be broken once the (Federal Reserve) starts signaling rate cuts next year," Clancy said.
While home sales were higher in the year 2000, when mortgage rates were also higher, Yun of NAR said affordability was a major change.
Wages and incomes have risen by 80 percent to 100 percent depending on measurement, he told reporters, while home prices have risen by 180 percent.
Home prices over this 20-year period "easily outpaced" incomes and that is why affordability is holding back sales, he said.
All four major US regions logged sales declines compared with a year ago, the NAR said on Tuesday.
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