U.S. existing home sales drop 2.7% to 9-month low as 7% mortgage rates and soaring prices deter buyers

U.S. existing home sales slumped in June 2025 to their weakest level in nine months, with elevated mortgage rates and soaring prices continuing to stifle demand. The National Association of Realtors (NAR) reported a 2.7% month-over-month decline in sales, settling at a seasonally adjusted annual rate of 3.93 million transactions. This marked the lowest reading since November 2024 and exceeded expectations for a more moderate drop. Year-over-year sales remained flat, though regional declines were concentrated in the Northeast, Midwest, and South, while the West saw a slight uptick [1].

The market’s stagnation reflects a persistent affordability crisis. Mortgage rates lingered near 7% in April and May—the period when most June closings entered contracts—discouraging buyers from entering the market. "Existing home sales have been in purgatory since mortgage rates spiked in 2022," noted Lance Lambert, editor-in-chief of ResiClub. "Strained affordability is making it harder for sellers to find buyers at their asking price, and many would-be sellers are reluctant to leave their low-rate mortgages behind. This is an unhealthy housing market."

Home prices reached a record high in June, exacerbating the affordability gap. The median price for existing homes climbed 2% year-over-year to $435,300, extending a 24-month streak of annual gains. NAR Chief Economist Lawrence Yun highlighted the wealth gains for homeowners, stating that the average owner’s equity has increased by $140,900 over five years. However, he acknowledged that construction lags behind population growth, limiting options for first-time buyers. "If mortgage rates drop to 6%, we could see an additional 160,000 renters become first-time homeowners," Yun said, citing scenario analysis [1].

Inventory levels show a mixed picture. Total active listings rose to 1.53 million in June, a near 16% increase from a year earlier, but remained 0.6% lower than May due to seasonal factors. This translates to a 4.7-month supply of homes, aligning with pre-pandemic norms but still below the 6-7 months considered a balanced market. The increase in inventory has not translated to faster sales, as the average time on market hit 53 days—five days longer than June 2024. Price cuts became more common, with nearly 21% of listings experiencing downward adjustments, the highest June share since 2016 [1].

Regional disparities highlight the market’s uneven recovery. While the West posted modest gains, the Northeast, Midwest, and South saw declines. Single-family home sales dropped 3%, while condos and co-ops remained stable compared to May but fell 5.3% year-over-year. Yun attributed the nationwide price surge to years of undersupply, warning that construction must accelerate to meet demand. If mortgage rates ease in the second half of 2025, he anticipates a nationwide sales boost, driven by strong income growth and a robust job market [1].

The housing market’s stagnation raises broader economic concerns. Reduced activity could weigh on GDP, as home sales contribute significantly to economic output. Policymakers and financial institutions are monitoring the situation closely, particularly as affordability challenges persist. For now, the interplay of high rates, elevated prices, and inventory imbalances keeps the market in a state of limbo, with neither buyers nor sellers able to gain the upper hand [1].

Source: [1] [Housing Market 'Purgatory' for Existing Home Sales as Activity Falls to Lowest Level in 9 Months] [https://fortune.com/2025/07/28/housing-market-purgatory-existing-home-sales-june-real-estate-mortgage-rates/]