CNN  — 

The housing market is showing signs of cooling off.

Sales of existing homes – which include single-family homes, townhomes, condominiums and co-ops – were up 2% in July from the month before, marking two consecutive months of increases, according to a report from the National Association of Realtors.

The number of available homes for sale also rose a bit in July, relieving some of the pressure on buyers. And while home prices still climbed year-over-year, they did not top recent record levels, the report found.

“There has been a turn in the market from super heated to still very strong,” said Lawrence Yun, NAR’s chief economist.

A consistently tight supply of inventory has pushed home prices higher over the past year, but that picture is improving slightly, said Yun. The inventory of unsold homes increased 7.3% from June to July, but it was still down 12% from a year ago, NAR reported. Unsold inventory is at a 2.6-month supply at the current sales pace. A balanced market is about a 6-month supply of homes.

“We see inventory beginning to tick up, which will lessen the intensity of multiple offers,” said Yun. “Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available.”

The median price for an existing home in July was $359,900, up 17.8% from a year ago and marked 113 straight months of year-over-year gains. But the price jump for July is down from increases of 20% or more that were occurring in the market over the past year.

Cash purchases remained strong however, the report said. All-cash sales accounted for 23% of transactions in July, the same as the month before and up from 16% a year ago.

“Although we shouldn’t expect to see home prices drop in the coming months, there is a chance that they will level off as inventory continues to gradually improve,” said Yun.

But many people remain priced out. First-time buyers are continuing to struggle in this market, and are pushing rental rates higher as they give up on buying, Yun said. The share of first-time buyers in July was 30%, down from 31% in June and 34% in July 2020.

Low mortgage rates continue to be an important factor helping prospective homebuyers, said Danielle Hale, chief economist.

“Despite the ongoing challenges of today’s housing market, including limited inventory, lightning fast home sales and competition from investors with deep pockets, many buyers are finding ways to persist until they find and close on a home,” said Hale.

Still, she said, plenty of prospective buyers are considering whether to pause their search. But, Hale said, they should be aware that there is usually a seasonal reprieve in the competition heading into the fall.

“Although we didn’t see this sweet spot last fall as buyers were making up for time lost to lockdowns, there are signs that we’ll see it this year,” she said.

Yun said he has heard anecdotal reports from NAR member agents that fewer homes are being sold for more than the asking price than earlier this year, and there’s less intensity around bidding wars.

He expects there will be an inflection point this year where inventory will be greater than the year before.