The U.S. housing market is showing early signs of a turnaround after a prolonged slump, with sales of previously occupied homes ticking up in July 2025 and a notable shift in mortgage rate dynamics stirring new questions among buyers and analysts alike. According to the National Association of Realtors (NAR), existing-home sales climbed 2% from June to a seasonally adjusted annual rate of 4.01 million units. This figure not only outpaced economists’ expectations—who had predicted a 3.92 million pace, as reported by the Associated Press—but also marked a modest 0.8% increase compared to July of last year.
It’s a welcome but cautious rebound after two years of turbulence. Since 2022, the housing market has struggled under the weight of rising mortgage rates, which climbed from historic lows to levels not seen in decades, sending sales volume to its lowest point in nearly thirty years. This summer, however, a subtle but important shift has emerged. The average 30-year fixed mortgage rate, the bellwether for most American homebuyers, dropped to a 10-month low of 6.58% in mid-August and hovered around 6.67% in July—offering at least a glimmer of relief to those on the fence.
“The ever-so-slight improvement in housing affordability is inching up home sales,” said Lawrence Yun, NAR’s chief economist, in comments reported by AP. “Wage growth is now comfortably outpacing home price growth, and buyers have more choices.”
Indeed, the national median sales price for existing homes edged up just 0.2% year-over-year to $422,400 in July, according to both NAR and Bankrate. That’s the highest median price ever recorded for the month of July and marks the 25th consecutive month of year-over-year price increases. But the rate of appreciation has slowed considerably, with Yun noting that, “On a nationwide basis, we may have a single-digit price decline. That’s quite possible.” This moderation is a direct reflection of a growing inventory—1.55 million unsold homes at the end of July, up 0.6% from June and a striking 15.7% higher than a year ago, the highest since 2020.
The increase in available properties is giving buyers more negotiating power, but the market is still not fully balanced. At the current sales pace, July’s inventory represents a 4.6-month supply—up from 4 months last year, yet still below the five to six months typically considered a sign of equilibrium between buyers and sellers. Properties are also lingering longer: homes spent an average of 28 days on the market in July, compared with just 24 days a year earlier, NAR data shows.
Regionally, the picture is mixed. Sales in the Northeast rose to an annual rate of 500,000, up 2% from last year, while the Midwest saw a 1.1% rise to 940,000. The South led the way with a 2.2% increase to 1.85 million, but the West bucked the trend, dropping 4% to 720,000. Median prices varied as well, with the Northeast hitting $509,300 (up 0.8%), the Midwest at $333,800 (up 3.9%), the South at $367,400 (down 0.6%), and the West—still the priciest—at $620,700, though down 1.4% from last year, according to Bankrate.
First-time buyers remain a crucial barometer for the market’s health. In July, they accounted for 28% of sales, down from 30% in June but a step up from the all-time low of 26% seen last August and September. Cash buyers, who are less sensitive to interest rate fluctuations, made up 31% of transactions in July, up from 29% in May.
All eyes are now on mortgage rates, which continue to shape the market’s trajectory. While the 30-year fixed rate remains stubbornly high—nudging up to 6.76% on August 21, according to data from Zillow—the real action is happening with adjustable-rate mortgages (ARMs). On the same day, the 5-year ARM plunged by 23 basis points to a national average of 7.09%. The 7-year ARM also saw a sharp drop, falling 40 basis points to 7.13%. These moves are being driven by growing confidence that the Federal Reserve is poised to cut its benchmark interest rate at its September meeting, a sentiment echoed by market indicators and analysts alike.
“The fate of the housing market in the coming months will be dictated in part by the direction of mortgage rates, as well as the health of the broader economy,” said Mark Hamrick, Bankrate’s senior economic analyst. “The market could benefit from a combination of tailwinds, if they were to develop and are sustained.”
The Federal Reserve’s actions have been central to the market’s recent volatility. After a historic rate-hiking campaign in 2022 and 2023 to combat inflation, the Fed pivoted late last year, delivering three quick cuts. But 2025 has been marked by five consecutive meetings with no changes, as policymakers weigh a cooling labor market (unemployment now sits at 4.2%) against inflation that remains stubbornly above the 2% target, currently at 2.7%. At the most recent meeting in July, two Fed governors even voted for a rate cut, highlighting the mounting pressure to act.
For homebuyers, especially those considering ARMs, the coming weeks could be pivotal. Adjustable-rate products, which offer lower initial payments, are becoming more attractive for buyers who expect to move or refinance within a few years—especially if further Fed cuts drive down rates more broadly. However, for those planning to stay put long-term or who value predictability, the fixed-rate mortgage remains the gold standard, despite its current cost.
“Now, with more inventory buyers [are] in a much better position to negotiate for better prices,” Yun told AP, underscoring the shifting dynamics. But affordability remains a challenge. Even with the slight dip in rates and slower price growth, home prices are still at record highs, and many buyers remain priced out unless rates fall further. Lower mortgage rates could lure more buyers into the market, potentially reigniting price pressures—a delicate balancing act that will play out as the Fed’s next moves become clear.
Key dates are circled on every analyst’s calendar: Federal Reserve Chair Jerome Powell’s speech at Jackson Hole on August 22 and the next Fed meeting on September 16-17, when a rate cut is widely anticipated. The outcome will set the tone not just for the housing market, but for the broader economy as well.
In the meantime, buyers and sellers alike are navigating a market in flux—one where patience, timing, and a careful reading of the economic tea leaves may prove just as important as square footage or curb appeal.
