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existing home sales growing 1.3% in July to a seasonally adjusted annual rate of 3.95 million. Now that 1.3% growth rate was in line with expectations, and here with more reaction, we've got Skyler Olsen, the chief economist over at Zillow. Skyler, thanks so much for joining us here this morning. So, first and foremost, I mean, just give us your read through broad strokes on the housing market as it stands right now, even with this latest data that's come through.

Yeah. I mean, this latest data was, I'd go so far as to say relief to come back to kind of the expectations that we are on a steady and slow recovery from those super low volumes of not just sales, but what often determines sales these days, which are new listings from existing owners, which honestly still remain incredibly low compared to pre-pandemic, because interest rate lock in is most certainly a thing. Uh, but we have been seeing that kind of steadily come back. June's existing home sales numbers were very disappointing. It showed a big slowdown from buyers. These July numbers are a bit more back to balance. That said, Zillow's data that captures things like competition between buyers and sellers. So think things like how many listings have a price cut? How fast homes sell or even how many people we see searching Zillow relative to the number of listings available. That return of inventory coming back up slowly that was also in the July report from NAR, shows that there's lessening of competition in the housing market. So maybe a better opportunity for buyers, particularly in the south. But then at the close of July, so over the course of August, we've since seen mortgage rates come down a little bit more. So let's meet next month and talk about whether or not that softening dynamic in the housing market is still even at play.

You know, it's really interesting, and one of my favorite questions with, you know, economists like yourself is where do you think the mortgage rate will need to get to in order to really entice a drove of buyers to come in off the sidelines and perhaps in even some refinancing from those who are sitting on some very low rates right now?

Yeah, I mean droves, if you want droves, we got to go all the way below 5%. Uh, something that you know, we think about when we think about that tipping point rate, what it takes, right? To bring people back in. We could compare affordability. Uh, so what is that mortgage payment relative to income? You know, as mortgage rates come down to 6%, you know, in that range at 20% down, the typical US home is affordable to the median household income. So at that moment, you could see that a certain, you know, employed ready buyers who have had that savings are ready to go. We'll certainly want to move forward. But in terms of that incredible, um, not just affordability advantage relative to incomes, but also compared to rents or staying in your apartment, you know, pre the mortgage rate lift up, you would have saved $500 a month to become a new homeowner. These days it's more in a wash. So if you want droves of buyers to return, if mortgage rates come down below six, that's that advantage above and beyond renting that same home. But that's, as you know, obviously there's a lot of nuance here. Any break in mortgage rates when we see that affordability for that middle-income American is going to do, uh, kind of wonders for the buyer's ability to move forward.

So with that in mind, what is your anticipation for the cooler months in the back half of this year, where perhaps there are a lot of people going out to open houses right now, still some bidding wars that are being reinitiated here. What is that set up for the fourth quarter of this year in the housing market, especially knowing that everybody by then is going to expect to have seen the Fed at least cut rates once in September.

Well, I think that last point is really what you're hitting on here, that there's, it feels like there's a lot of behavioral elements going on with how people are trying to maybe strategize through the end of the year. So perhaps June's numbers were so soft because during that time, there was a lot of language about, you know, price cuts coming soon, right? So it's like anticipating this advantage later, I might be putting off the moves I would otherwise want to be making today. So let's think, let's say we won. Rate cuts are already probably drifting down, are now in like six and a half ballpark range, and maybe they'll stay there depending, you know, obviously tomorrow at Jackson Hole, we'll all be listening to find out. So if we continue to have confidence in that rate cut in December, if not September, then rates can stay to kind of this low level. Should we get, you know, that break or continue to have breaks in rates, you might see mortgage rates drive a lot of their own seasonality because people have been maybe putting off or timing it or have been unable to move forward and qualify because rates, you know, went up so quickly, and they haven't yet had the chance to save up more of the down payment that they would need to access the same home that they used to want to target.

Skyler Olsen, who is the chief economist over at Zillow. Skyler, great to have you here on the show with us. Appreciate the time and insights.