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High mortgage rates are keeping homebuyers on the sidelines, leading to declining home sales and a build-up of supply.

The number of homes for sale nationwide in June rose 2%. That’s the first annual increase since July 2019, before the pandemic-fueled homebuying frenzy sapped the market of available homes and sent buyers into bidding wars for nearly every listing. Now, supply has built up as the combination of 5.5%-plus mortgage rates, high home prices and a faltering economy push more buyers to the sidelines, thereby creating a more balanced market. Home sales fell nearly 16% from a year ago, the largest decline since May 2020. The shift has also started impacting sale prices: They’re still growing by double digits, but the 11% year-over-year increase is the smallest in nearly two years.