From Frenzy to Freeze: The Housing Market’s New Reality

From Frenzy to Freeze: The Housing Market’s New Reality

• The number of existing homes for sale was at 1.55 million in July.
• That equals 4.6 months’ worth of supply.
• The pace of annualized price growth is flatlining.

Rising housing inventory is starting to weigh on price growth…

The housing market is losing steam—and fast. Earlier this week, Redfin reported that homes are selling at the slowest summer pace in a decade. In July, properties sat on the market for an average of 43 days. That’s not just a slowdown—it’s a reset. For context: last year it was 35 days, and in 2021, just 16. The last time we saw this kind of stagnation was back in 2015.

The National Association of Realtors (“NAR”) confirmed the trend yesterday. Existing home sales held steady at an annualized pace of 4.1 million—still stuck at the bottom of a multi-year range.

So, what’s driving the freeze?

The COVID-era mortgage boom. Nearly 78% of homeowners now hold mortgages below 5%, with 59% under 4%, and 22% locked in under 3%, according to Goldman Sachs. Compare that to today’s 6.7% rate on a conventional 30-year mortgage. Sellers don’t want to give up their low rates and mortgage payments. Buyers don’t want to pay up for new ones. Result? A standoff—and rising inventory.

The NAR data also showed the number of available homes climbed from 1.53 million in June to 1.55 million last month, pushing supply above pre-pandemic levels. That shift is already pressuring prices. That should help to keep a lid on inflation growth. It also opens the door for the Fed to resume rate cuts later this year. That would underpin a steady rally in the S&P 500 Index.

But don’t take my word for it, let’s look at what the data’s telling us…

Each month, NAR releases a suite of housing indicators. Existing home sales typically account for 85–90% of total annual volume, making them a key gauge of market health. In July, months’ supply—a measure of how long it would take to sell all listed homes—hit 4.6. That’s just below June’s 4.7, but still one of the highest readings in over seven years.

Buyers now have options. While NAR numbers on how long homes stay for sale was lower than Redfin’s, the trend was still the same. Properties lingered on the market for 28 days in July, up from 24 a year ago. In fact, inventories are at their highest since May 2020, according to NAR Chief Economist Lawrence Yun.

And prices? They’re flatlining.

Realtor.com reports the median listing price per square foot was $231 in July—down from $233 in June and up just 0.4% year-over-year. That’s a far cry from the 21% surge we saw in June 2021. Annualized growth hasn’t been this subdued since the Fed was actively hiking rates.

The same story plays out in sale prices. NAR says the median existing home price in July was just over $422,000—up a mere 0.2% year-over-year. That’s down from a 2% increase last month and 25% in June 2021. July marked the fourth straight month of sub-2% annualized growth—a trend that began in early 2023 when the Fed started dialing back its tightening cycle.

At the end of the day, rising inventory is putting a lid on prices. The Fed’s cautious stance on rate cuts is keeping buyers sidelined. With fall approaching, and families sending kids back to school, the market could get even tougher.

Housing prices make up roughly 35% of the Consumer Price Index and 17% of the Personal Consumption Expenditures index. So, swelling supply should help tame inflation in the months ahead. That’ll weigh on owners’ equivalent rent and increase the odds of future rate cuts—supporting a steady rally in the S&P 500.

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