Morning Market Brief: July 24, 2024

High interest rates weighing on real estate demand 

The National Association of Realtors (NAR) in the US reported that sales of existing homes dropped for a fourth straight month in June. Demand for real estate has softened in recent months with mortgage rates remaining elevated, and much uncertainty about when the US Federal Reserve Board (Fed) will begin lowering interest rates. Demand has also been impacted by high home prices, with the median price reaching a record high in June. 

• The NAR reported that sales of existing homes fell by 5.4% in June over May, the fourth straight decline. Home sales amounted to 3.89 million in June, the lowest monthly number in 2024. The median home price rose to a record US$426,900 in June.
• Homes available for sale increased over the month, rising by 3.1% in June. This has helped gradually turn the real estate market into a buyer’s market.
• Demand remains relatively muted. After an initial surge to start 2024, home sales have steadily dropped, with the Fed holding steady and likely to keep interest rates higher for longer. Last week, the Mortgage Bankers Association of America said the rate on a 30-year fixed-rate mortgage was 6.87% over the week ended July 12. Mortgage rates have hovered close to 7% over 2024.
• Home sales have been relatively soft in Canada as well. Mortgage rates have also been elevated in Canada, weighing on demand. The Bank of Canada lowered interest rates in June, which it hopes might help lift activity in Canada’s real estate market.

The NAR has commented that the real estate market in the US is slowly turning into a buyer’s market. This is likely to put less upward pressure on home prices. Furthermore, mortgage rates are likely to come down when the Fed begins lowering interest rates, which is expected to be sometime this year. The Fed makes its next interest-rate decision on July 31.

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