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It's a tough time for anyone trying to buy their first home. Prices are high. Mortgages keep getting more expensive. Home sales that were already sluggish dropped further in July. But million-dollar homes are selling quickly. NPR's Scott Horsley reports on the two-speed housing market.
SCOTT HORSLEY, BYLINE: Sales of existing homes fell by 1.7% last month. A lot of would-be buyers are feeling priced out of the market now that mortgage rates have climbed to their highest level in a year, nearly 6.7%. Nashville realtor Jack Gaughan says each time interest rates tick up, buyers have to rethink how much home and where they can afford to buy.
JACK GAUGHAN: It just makes it where there's so much uncertainty, especially for those newer, younger buyers who are already probably overly anxious about the thought of making such a large purchase. It kind of maybe will make you think twice before doing it.
HORSLEY: Earlier this year, mortgage rates briefly dipped below 6%, sparking hopes of a housing rebound. But then the war with Iran triggered a spike in inflation, and mortgage rates started climbing again. That's especially challenging for first-time buyers, whose share of home purchases shrank last month. Senior economist Charlie Dougherty at Wells Fargo says the pain of rising interest rates is compounded by high sale prices. The average home sold for just over $434,000 last month. And Dougherty says the job market is softening, so family incomes are not keeping up.
CHARLIE DOUGHERTY: It looks like the housing market is still on the mat, pinned down by really challenging affordability conditions.
HORSLEY: It's a different story, however, at the upper end of the market, where sales of homes priced at a million dollars or more are growing rapidly. Gaughan says the buyers eyeing those homes have often sold another house or are otherwise flush with cash, and they don't have to worry so much about rising interest rates.
GAUGHAN: It speaks to the wealth gap that we continue to see, where there's a lot of people just getting very, you know, wealthy these days. And that's great, and that means that there's a lot more luxury home seekers out there these days.
HORSLEY: The overall housing market remains stuck in a slump, though, and that's a drag on other parts of the economy, like sales of furniture and appliances. Once inflation cools, it's possible mortgage rates will come down, but for now, market observers are not holding their breath. A survey by the National Association of Realtors found few agents expect much improvement in the number of buyers or sellers in the next three months. Scott Horsley, NPR News, Washington.
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