Sales of previously owned U.S. homes ticked unexpectedly higher in July, but the pace of sales remains sluggish amid affordability issues for buyers thanks to high house prices and interest rates on mortgages.

Home sales rose 2.0% last month to a seasonally adjusted annual rate of 4.01 million units from 3.93 million in June, the National Association of Realtors said on Thursday. Economists polled by Reuters had forecast home resales would be essentially unchanged from June at 3.92 million units. Sales edged up 0.8% on a year-over-year basis.

NAR Chief Economist Lawrence Yun saw the data as suggesting that some relief in the factors that have weighed on home sales – high borrowing costs and prices and limited inventory – may be in the offing. The sales pace over the last two years has averaged right around 4 million units a month, a weaker rate than seen even during the 2007-2009 recession that was triggered by a collapse in the housing market.

The average rate on a 30-year-fixed rate mortgage recently fell to the lowest level since last fall at 6.58%, according to data from Freddie Mac, but rates remain appreciably higher than they were coming out of the COVID-19 pandemic.

With the Federal Reserve widely expected to resume interest rate reductions next month, Yun said mortgage rates may have room to fall further in the months ahead.

“The ever-so-slight improvement in housing affordability is inching up home sales,” Yun said in a statement. “Wage growth is now comfortably outpacing home price growth, and buyers have more choices. Condominium sales increased in the South region, where prices had been falling for the past year.”

Sales rose month-over-month in the Northeast, South and West but fell in the Midwest.

The median sales price rose 0.2% from a year earlier to $422,400 – the 25th straight year-over-year increase – but slipped from June’s record-high level.

The year-over-year price increase was the smallest since June 2023, Yun said.

Total inventory also edged up to 1.55 million units. At the current sales pace, that inventory would last 4.6 months, down from 4.7 months in June.

The share of all-cash transactions was 31%, which Yun described as unusually high. Investors made up 20% of all transactions, up from 13% a year ago.

First-time buyers accounted for 28% of sales in July, down from 30% in June and 29% a year ago.

“Homebuyers are in the best position in more than five years to find the right home and negotiate for a better price. Current inventory is at its highest since May 2020, during the COVID lockdown,” Yun said.

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(Reporting by Dan Burns; Editing by Andrea Ricci)