The monthly payment on a new $500,000 home loan is $1,200 higher than on a mortgage taken out in 2021

U.S. existing home sales fell more than anticipated in June, with the median house price hitting another record high. However, improving supply and declining mortgage rates offer hope for a potential rebound in the coming months.

The National Association of Realtors reported on Tuesday that this is the fourth consecutive monthly decline in home resales, indicating that the housing market likely contracted in the second quarter after boosting economic growth in the January-March quarter.

"Record-high home prices and high mortgage rates weighed on existing home sales in June," said Nancy Vanden Houten, a senior economist at Oxford Economics. "The more recent decline in mortgage rates, which we expect to gain steam as interest rate cuts by the Federal Reserve get underway, will support a modest rebound in home sales later in the year."

Home sales dropped 5.4% last month to a seasonally adjusted annual rate of 3.89 million units, the lowest level since December. Economists polled by Reuters had predicted home resales would decline to a rate of 4.00 million units.

The median existing home price surged 4.1% from a year earlier to a record high of $426,900. Despite house prices reaching a new peak for the second straight month, the pace of increase has slowed, with supply nearing a four-year high.

Home resales, which constitute a significant portion of U.S. housing sales, declined 5.4% on a year-on-year basis in June. Existing home sales are counted at the close of a contract, meaning June's sales likely reflected contracts signed in the prior two months when the average rate on the popular 30-year fixed-rate mortgage was above 7.0%.

The average rate on a 30-year fixed-rate mortgage dropped to a four-month low of 6.77% last week, down from 6.89% the previous week, matching the average rate during the same period in 2023, according to data from mortgage finance agency Freddie Mac.

Rates have eased from a six-month high of 7.22% in early May amid hopes that the Federal Reserve will deliver a long-anticipated interest rate cut in September. The housing market has been the hardest hit by the U.S. central bank's aggressive monetary policy tightening to control inflation.

Stocks on Wall Street were trading higher, the dollar rose against a basket of currencies, and U.S. Treasury yields dipped.