U.S. Housing Market Faces Challenges With Rising Prices and Mortgage Rates

Sales of previously occupied homes in the United States decreased again in July. The National Association of Realtors (NAR) reported a 1.7% drop from June, reaching a seasonally adjusted annual rate of 4.06 million units. This was slightly above economists’ expectations of 4.05 million, according to FactSet, but sales were 0.7% higher than the previous year.

Home prices reached unprecedented levels for July, with the U.S. median sales price rising 2% from the prior year to $434,100. In June, the median price was $442,800, the highest on record since data collection began in 1999. Home prices have increased annually for 37 consecutive months.

The mortgage market witnessed significant changes as well. Freddie Mac reported that the benchmark 30-year fixed mortgage rate rose to 6.69%, marking the highest level in over a year. This was the fifth consecutive week of rising rates, adding pressure on potential homebuyers who face high borrowing costs.

No one who has a home already can afford to sell it, noted Carl Weinberg, chief economist at High Frequency Economics. People with ultra-low COVID-era mortgages cannot afford to give them up. If no one is selling, no one can be buying, and inventories are low.

Home sales have been languishing near a 4-million annual pace for about three years, far below the historic average of around 5.2 million. The U.S. housing market has been struggling since 2022, when mortgage rates began climbing from pandemic-era lows. Last year, home sales hit a 30-year low, remaining nearly flat.

Sluggish sales continue as mortgage rates trend upward, influenced by higher inflation expectations amid rising oil prices. Long-term bond yields, used by lenders for home loan pricing, have also increased, leading to higher mortgage rates. Home inventories are below historical norms, with 1.54 million unsold homes at the end of last month. This is a 1.9% decrease from June and 0.6% lower than July of last year.

The market had about a 4.6-month supply at the current sales pace in July. A balanced market typically requires a 5- to 6-month supply. The Northeast region saw prices rise more quickly than other regions, with a 5.2% year-over-year increase due to a shortage of inventory.

NAR reported that 29% of sales in July were first-time homebuyers, down from 33% in June but slightly higher than the 28% seen in July 2025. Historically, first-time buyers constitute about 40% of the housing market.