Although there are more homes for sale, there are not enough to lower prices or pull the sluggish real estate market out of its doldrums.

Sales volume for existing homes rose 1.3 percent in July from June but remained near the lowest level on record, the National Association of Realtors said Thursday. The seasonally adjusted annual rate was 3.95 million homes sold, the slowest pace for a July since 2010. It was the first time in five months that sales had increased.

Despite an increase in inventory – up 0.8% from June and 19.8% over the past 12 months – high prices and a lack of choice continue to hold back sales. There were 1.33 million homes on the market in July, far fewer than the 1.9 million for sale in July 2019 before the pandemic hit. The median sales price for existing homes was $422,600, up 4.2% from the previous July.

Difficult market for first-time buyers

The numbers highlight how daunting the real estate market has become for first-time buyers since the pandemic hit – home prices have risen 49 percent since July 2019, when the average home sold for $283,600.

This has “led to a pretty big gain over the last five years,” said Lawrence Yun, chief economist at the National Association of Realtors, in a conference call with reporters. “This is definitely very good news for homeowners who are reaping all these gains, but frustrating news for people who are trying to get into the homeownership market.”

Mortgage rates have been falling in recent months, and economists say that could help break the dynamic of high prices and low sales that has characterized the housing market in recent years. The average interest rate on a 30-year mortgage was 6.46 percent this week, down from a peak of 7.79 percent last fall, according to Freddie Mac. Rates have fallen because financial markets expect the Federal Reserve to cut its influential benchmark interest rate next month to end its battle against inflation.

Lock-in effect could diminish

The supply of properties for sale is low because many homeowners have been reluctant to trade in mortgages they took out when interest rates were lower. However, the recent decline in interest rates is easing this “lock-in” effect.

However, Yun pointed out that inventory is still so low that buyers will have to compete for the relatively few homes on the market, which will keep prices rising.

“We are trying to get inventory back to normal, but it is not back to normal yet,” he said.