July Home-Price Gains Were the Weakest Since 2023. This Economist Says Broader Declines May Be Ahead.

A home for sale in the Encino neighborhood of Los Angeles. Prices fell in the western U.S. last month. (Eric Thayer/Bloomberg)

The housing market has been frozen by higher costs for several years, and prices are finally feeling the chill. There could be broader declines ahead, says one economist.

Prices for existing homes nationally inched up 0.2% from the year prior to a median sale price of $422,400 in July, according to National Association of Realtors data released Thursday. It was the weakest reading since existing-home prices fell 0.9% in June 2023.

“Near-zero growth in home prices suggests that roughly half the country is experiencing price reductions,” Lawrence Yun, the trade group’s chief economist, said in a statement. Prices fell a respective 0.6% and 1.4% in the South and West, and increased 0.8% and 3.9% in the Northeast and Midwest.

Some buyers are taking advantage, the data suggest. Home sales increased 2% from the previous month to a 4.01 million seasonally adjusted annual rate. While that is still slow, it is faster than the consensus call on FactSet, which called for a decline to an annual rate of 3.92 million from 3.93 million one month prior.

“The ever-so-slight improvement in housing affordability is inching up home sales,” Yun said. “Wage growth is now comfortably outpacing home price growth, and buyers have more choices.”

A persistent increase in home listings is one sign of the housing market’s more buyer-friendly shift. There were 1.55 million homes for sale at the end of July, the highest count since the pandemic’s early months.

Prices nationally could fall as much as 5%, Yun said, adding that such a drop wouldn’t matter much for homeowners who have seen their values increase by 50% since before the pandemic, but could be of more consequence for buyers who recently purchased.

A 5% decline in prices could draw more buyers off the sidelines, but it would still fall short of making homes inexpensive. Zillow estimated in late July that home values would have to drop 18% or mortgage rates would need to fall to 4.43% for the median family to afford the typical home.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com