Home Sales Fall as Prices Hit Record High. Mortgage Rates Are Keeping the Market Stuck.

(Joe Raedle/Getty Images)

Existing-home sales fell to the lowest level since September while sale prices climbed to a record high. Mortgage rates need to drop for sales to meaningfully pick back up, one economist says.

Existing-home sales in June fell to a seasonally adjusted annual rate of 3.93 million, down 2.7% from the prior month’s revised rate and its lowest reading since September 2024, the National Association of Realtors said Wednesday. Economists surveyed by FactSet had expected a rate of roughly four million.

It’s a sign that the housing market is on track for another dismal year. Seasonally adjusted sales were flat from a year ago in June—but that’s not saying much: annual sales in 2023 and 2024 fell to their lowest levels since the mid-1990s.

“High mortgage rates are causing home sales to remain stuck at cyclical lows,” Lawrence Yun, the National Association of Realtors’ chief economist, said in a statement. “If the average mortgage rates were to decline to 6%, our scenario analysis suggests an additional 160,000 renters becoming first-time homeowners and elevated sales activity from existing homeowners.”

Mortgage rates have remained in a range from around 6.6% to just over 7% this year, according to Freddie Mac’s weekly measure. “If mortgage rates decrease in the second half of this year, expect home sales to increase across the country due to strong income growth, healthy inventory, and a record-high number of jobs,” Yun said.

If mortgage rates don’t decline, job gains and wage growth mean that more buyers will enter the market anyway—but only enough for “small, incremental, gains in sales,” the economist said.

“If the mortgage rate was to drop, we know there will be a more meaningful increase in sales,” Yun said. “The key question is: are we going to have enough supply?”

High home prices aren’t helping. The median existing-home sale price in June rose 2% from the year prior to $435,300—a record high, according to NAR readings that date to 1999.

“Multiple years of undersupply are driving the record high home price,” Yun said, adding that home construction is growing slower than the population. “More supply is needed to increase the share of first-time home buyers in the coming years even though some markets appear to have a temporary oversupply at the moment.”

Home price trends aren’t uniform across the country. Prices are barely rising in regions with plenty of supply. Prices inched up 0.3% from the year prior in the south, and rose 1% in the west, the NAR data show. Gains were stronger, at 4.2% and 3.4%, in the northeast and Midwest, respectively.

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