High Prices and Rates Cool June Home Sales as Durable Goods Orders Climb Copy
Weekly Economic Review: July 25, 2025
This week’s economic data highlights include: (1) existing home sales for June, (2) new home sales for June, and (3) the advance report on durable goods for June.
Key Summary:
Existing home sales declined in June due to high prices and mortgage rates, with rising inventory and seasonal demand failing to boost activity, while home prices continued to climb.
Existing home sales declined in June, marking their lowest level since late 2024. The drop was attributed to persistently high home prices and mortgage rates, which continue to weigh on buyer demand. Most regions experienced a decline in sales; the West was the only area to see a modest increase. The overall figure also fell short of market expectations, reflecting ongoing challenges in housing affordability and financing conditions.
On an annual basis, sales were flat after several months of year-over-year declines. Price growth continued, with the median existing home price reaching a new high for the month of June. This marks the 24th consecutive month of annual price increases, underscoring the resilience of home values despite softening sales activity. Regional trends were mixed, with some areas seeing price gains while others experienced declines.
Inventory levels saw a slight monthly decrease but remained significantly higher than a year ago. The increase in available homes and the seasonal trend of families moving before the start of the school year has not led to stronger sales so far this year. Market dynamics such as the share of first-time buyers, all-cash transactions, and time on market remained relatively stable. Investor activity declined to its lowest point in nearly three years. Mortgage rates showed a slight decline but remained elevated compared to historical norms, continuing to impact affordability.
New home sales rose slightly in June but remained below expectations as affordability challenges persisted despite increased inventory, incentives, and a decline in prices.
In contrast to sales of existing homes, new single-family home sales enjoyed a modest increase in June. Sales recovered slightly after a sharp decline in May, though still falling short of expectations. Despite efforts by homebuilders to stimulate demand through incentives and mortgage rate buydowns, overall sales remained subdued compared to the previous year.
Inventory levels continued to rise, extending the months’ supply of new homes, while the median sales price declined both month-over-month and year-over-year. This marked the ninth annual price drop in the past twelve months, and a softening in pricing momentum. The lower prices have yet to ease ongoing affordability pressures, however.
While overall durable goods orders declined due to a drop in commercial aircraft orders, underlying business investment and shipments remained relatively stable.
The latest advance report from the U.S. Census Bureau shows a notable decline in durable goods orders. This drop follows a sharp increase the previous month and marks the steepest monthly decline in several years. The downturn was primarily driven by a significant fall in commercial aircraft orders, which had previously surged. Despite the monthly drop, year-over-year figures still show growth, though at a slower pace than before.
Core capital goods orders, which exclude volatile items like aircraft and defense equipment, also declined, suggesting businesses are exercising caution in their investment decisions amid ongoing trade and policy uncertainties. However, shipments of these goods slightly exceeded expectations, indicating some resilience in business activity. Meanwhile, shipments of non-defense capital goods (including aircraft) fell modestly. The decline in shipments, which contribute to GDP calculations, points to potential future softness in equipment investment.
Let’s take a closer look at this week’s data releases, including existing and new home sales, and advance durable goods.
Existing Home Sales – June Update:
According to the National Association of Realtors, existing home sales declined by 2.7% month-over-month in June, reaching a seasonally adjusted annual rate of 3.93 million units. This represents the lowest level since September 2024 and a decrease from 4.04 million units in May (revised upward from 4.03 million). The figure also fell short of market expectations, which stood at 4.00 million units. The monthly decline was primarily attributed to elevated home prices and mortgage rates. Regionally, sales decreased in the Northeast by 8.0%, in the Midwest by 4.0%, and in the South by 2.2%. Conversely, the West experienced a modest increase of 1.4%.
On a year-over-year basis, sales remained unchanged following four consecutive months of annual declines. Sales fell in the Northeast by 4.2% and in the West by 4.1%, while the Midwest and South recorded increases of 2.2% and 1.7%, respectively. The median existing home price across all housing types and regions rose by 2% year-over-year to $435,300, up from $426,900. This marks the highest level recorded for the month of June and the 24th consecutive month of annual price increases. In the West, the median price increased by 1% to $636,100.
The inventory of unsold existing homes declined slightly, by 0.6% in June, to 1.53 million units. Although still below the pre-pandemic level of 1.9 million units, this represents a 15.9% increase compared to the same period last year. Due to declining sales and elevated inventory levels of existing homes for sale, the Months’ Supply of Inventory (MSI) rose to 4.7 months, up from 4.6 months in May and 4.0 months in June 2024. A supply range of 4 to 7 months is generally considered indicative of a balanced market. Despite the higher inventory of previously owned homes and the fact that families typically move prior to the start of the school year, these factors have not translated into increased sales.
First-time buyers accounted for 30% of transactions in June, unchanged from May and up from 29% a year earlier. All-cash sales comprised 29% of transactions, an increase from 27% in the previous month and 28% in June 2024. Sales to investors fell to 14% in June, down from 17% in May and 16% in June 2024, the lowest level since September 2022, as individual investors continued to retreat from the market. Homes typically remained on the market for 27 days, consistent with May but longer than the 22-day average recorded a year ago. Distressed sales, including foreclosures and short sales, represented 3% of transactions – unchanged from May and slightly higher than the 2% reported in June 2024.
According to Freddie Mac, as of July 24 the average 30-year fixed-rate mortgage stood at 6.74%, marginally lower than 6.75% a week earlier and 6.78% a year ago.
New Home Sales – June Update:
According to the U.S. Census Bureau and the Department of Housing and Urban Development, sales of new single-family homes rose slightly in June, by 0.6% month-over-month, to a seasonally adjusted annual rate of 627,000, following an 11.6% decline in May. However, June’s figure fell short of market expectations of 650,000, which would have represented a 4.3% increase.
On a year-over-year basis, sales were down 6.6% from 671,000 in June 2024. The June data indicated that homebuilders continued to face challenges in boosting sales, despite offering increased incentives and mortgage rate buydowns. Regionally, sales increased in the South by 5.1% to 390,000 units and in the Midwest by 6.3% to 85,000 units. In contrast, the Northeast saw a sharp decline of 27.6% to 21,000 units, while the West fell by 8.4% to 131,000 units.
The inventory of new homes for sale rose by 1.2% in June to 511,000 units. This represents a 9.8-month supply at the current sales pace, the highest level since September 2022, and a slight increase from 9.7 months in May. The median sales price of new homes declined to $401,800, down 4.9% from $422,700 in May and 2.9% from $414,000 in June 2024, marking the ninth annual decline in the last twelve months and reflecting some softening in pricing amid broader affordability pressures.
Advance Durable Goods – June Update:
The U.S. Census Bureau has released its advance report on durable goods – items such as appliances and aircraft that are designed to last at least three years. In June, durable goods orders – a key leading indicator of business and consumer confidence as well as future demand and production – declined by 9.3%, following a revised 16.5% sharp increase in May (previously reported as 16.4%). This marks the largest monthly decline since April 2020 but was slightly better than market expectations of a 10.7% drop. The downturn was primarily driven by a 51.8% plunge in commercial aircraft orders, following a 232% rise in May. On a year-over-year basis, durable goods orders rose 10.9% in June, down from a 19.8% increase in May.
Core capital goods orders – which exclude aircraft and defense-related items and are a key gauge of business investment – declined 0.7% in June, following a revised 2.0% increase in May (originally reported as 1.7%). This suggests that businesses remain cautious about capital spending amid ongoing uncertainty surrounding tariffs and trade policy. Year-over-year, core capital goods orders rose 2.8% in June, down from 4.1% in May. Shipments of core capital goods increased 0.4% in June, following a 0.5% gain in May, exceeding expectations of a 0.2% rise. Meanwhile, nondefense capital goods shipments including aircraft—which factor into the equipment investment component of GDP—fell 0.9% in June, after remaining flat in May.
Market Analysis:
Equity markets ended the week on a strong note, driven by upbeat earnings reports, optimism around trade developments, and continued leadership from AI and tech sectors. The S&P 500 rose 1.5% to close at 6,388, marking five consecutive record highs. The Dow Jones Industrial Average gained 1.3%, finishing at 44,901, while the Nasdaq climbed 1.0%, also reaching a new all-time high.
Treasury yields were relatively stable over the week. The 2-year note rose by 3 basis points to 3.91%, while the 5-year and 10-year notes edged lower to 3.95% and 4.40%, down 1 and 4 basis points, respectively, from the prior week.
Markets are currently pricing in two quarter-point rate cuts in 2025, totaling a 0.50% reduction. The first cut is anticipated at the October FOMC meeting, followed by another in December, which carries a 75% probability. If the December cut does not materialize, markets are assigning a 100% probability to a second cut in January 2026. Looking further ahead, two additional cuts are expected by September 2026, with one more projected in December 2026, currently priced in with a 40% probability.
Next Week’s Economic Calendar:
Markets will be closely watching several key economic indicators in the coming week for signals on the direction of the U.S. economy. On Tuesday, attention will turn to the release of the June Consumer Confidence Index from the Conference Board and the June JOLTS report. On Wednesday, the preliminary estimate of Q2 GDP will be released, with expectations for 2.5% growth following a 0.5% contraction in Q1. The Federal Reserve will also conclude its two-day policy meeting, with markets widely anticipating that interest rates will be held steady, followed by a press conference from Chair Jerome Powell.
On Thursday, the focus will shift to the release of the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge. The week’s most anticipated release, however, will be Friday’s July employment report. Economists expect nonfarm payrolls to rise by 101,000, with the unemployment rate ticking up from 4.1% to 4.2%. Average hourly earnings are forecast to increase by 0.3% month-over-month and 3.8% year-over-year, offering key insights into labor market strength and wage pressures.
Mark Yoon, CFA CPA
EVP & CFO of Commercial Bank of California
Thomas McCullough
EVP of Commercial Bank of California
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