'Housing Recession' Drove Prices Lower in July

Sales slow and prices ease as higher mortgage rates continue to quash market

A woman wearing a t-shirt looks at a smartphone screen while holding a credit card in the other hand. She's relaxing in a lounge chair on an outside porch or deck.

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If you’ve been waiting for home prices to start coming down, it’s finally happening. 

The median price for a home was $403,800 in July, $10,000 less than the record high of $413,800 hit in June, the National Association of Realtors said Thursday. In a separate report, Zillow saw its home value index inch down $366 from June to $357,107, the first monthly decline of the housing price measure since 2012. Home sales fell for a sixth month, dropping 5.9% to their slowest pace since June 2020, the NAR said. 

Buyers have been dropping out of the market en masse ever since mortgage rates shot up earlier in the year, causing the mortgage payments on newly-bought homes to spike. Reduced demand has meant less buyer competition for homes, and decelerating home sales. Homebuilders have responded to the cooling market by starting fewer construction projects. However, the low number of homes on the market has kept prices from dropping until now.

"We're witnessing a housing recession in terms of declining home sales and home building," said Lawrence Yun, chief economist at the NAR, in a commentary. "However, it's not a recession in home prices.”

The slipping home prices, however, could be the start of a trend, economists said. With more housing inventory coming online—there were 1.3 million homes for sale in July, the highest since October 2020—the pandemic era’s extreme seller’s market may be fading. 

The cooling market is a direct result of the Federal Reserve’s war on inflation. The central bank has jacked up its benchmark interest rate in recent months, increasing borrowing costs on all kinds of loans, including mortgages, in an effort to slow the economy and put a lid on rising prices. The average rate banks offered for a 30-year fixed rate mortgage this week was 5.13%, mortgage giant Freddie Mac reported Thursday. That’s down considerably from its recent peak in June when it hit 5.81%, but still nearly double the record low of 2.65% it fell to in 2021. 

Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.

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  1. National Association of Realtors. “Existing-Home Sales Retreated 5.9% in July.”

  2. Zillow. “Buyers Gaining Time and Options as Housing Market Rebalances (July Market Report).”

  3. Wells Fargo. “Existing Home Sales Drop Again in July.”

  4. FreddieMac. “Mortgage Rates Revert from Last Week.”

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