LOS ANGELES (AP) — The U.S. housing market remains in a deep sales slump, but the worst declines may be over when it comes to home prices.

While home sales have fallen 22.3% through the first seven months of the year versus the same stretch in 2022, prices are being propped up by buyers competing for a near-record low inventory of properties on the market.

The national median sales price rose to $406,700 last month, marking its first annual increase since January and the second month in a row that it’s been above $400,000, the National Association of Realtors said Tuesday.

Home prices didn’t start falling on an annual basis until February, and even then the decline was modest, with the steepest drop 3% in May. That five-month streak of annual drops ended last month, when the median sales price rose 1.9% versus July last year. It’s now a eye-popping 45% higher than it was in July 2019.

So, where do prices go from here? Homebuyers hoping for a big drop may be disappointed.

“At least when it comes to home prices, it looks like the housing recession is already over,” said Lawrence Yun, the NAR’s chief economist, adding that he sees a greater chance of an increase in prices versus a decline in the coming months.

Mike Simonsen, president of Altos Research, which tracks data on the U.S. residential real estate market, echoed that outlook.

“For people who are on the sidelines there’s nothing in the data yet that suggests home prices are falling further,” Simonsen said.

A shortage of homes for sale has kept the market competitive, driving bidding wars in many places, especially for the most affordable homes. About 35% of homes sold in July fetched more than their list price, according to the NAR. That’s in line with sales data for April through June.

While still low by historical standards, the inventory of homes on the market has been ticking higher as the average rate on a 30-year mortgage has risen to just above 7%, discouraging more would-be homebuyers. If mortgage rates remain elevated and inventory continues rising, the combination could weigh on home prices and cause the national median sales price to dip this fall, said Lisa Sturtevant, chief economist at Bright MLS.

“I think we’re going to see an overall kind of pullback in a segment of buyers for whom 7% mortgage rates are just off the table,” she said. “At the same time, we’ve started to see some movement on listings. And so, while I think we might have hit a bottom in terms of prices, I think it’s possible that we’ll see another dip in prices this fall for those couple of reasons.”

Other housing experts see little change in the U.S. median home price this year.

“Given that it still takes an outsized share of paychecks to buy a home at today’s prices and mortgage rates, but inventory remains low, I would expect home prices to move largely sideways,” said Danielle Hale, chief economist at Realtor.com.

Despite the resiliency of home prices throughout the market’s downturn, the current slump has shown few signs of easing.

Sales of previously occupied U.S. homes fell 2.2% in July from the previous month to a seasonally adjusted annual rate of 4.07 million, NAR said. That’s the slowest pace since January and below the 4.15 million pace that economists were expecting, according to FactSet.

Existing home sales sank 16.6% compared with July last year. It was also the lowest home sales pace for the month of July since 2010.

The annual sales decline was steepest in markets across the Northeast and Midwest, where sales slumped 20% or more, the NAR said.

One positive for home hunters: The inventory of homes for sale rose 3.7% in July from June, ending the month with 1.11 million homes on the market. That was still down 14.6% from a year earlier, however.

Homes listed for sale in July typically sold within just 20 days, with 74% staying on the market for less than a month.

All told, the number of homes on the market amounted to a 3.3-month supply at the current sales pace. In a more balanced market between buyers and sellers, there is a 5- to 6-month supply.

The combination of high borrowing costs and intense competition for the most affordable homes on the market is keeping many first-time buyers on the sidelines. They accounted for just 30% of home sales last month, though that was up from 27% in June, the NAR said.

“There’s virtually no inventory at the lower price point,” Yun said.

The latest housing market figures are more evidence that many would-be homebuyers are being shut out by the persistently low home inventory and rising mortgage rates.

The average rate on a 30-year home loan hovered just below 7% last month and has continued climbing, reaching 7.09% last week, according to mortgage buyer Freddie Mac. The average long-term U.S. mortgage rate is now at its highest level in more than 20 years.

High rates can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already unaffordable for many Americans. They also discourage homeowners who locked in low rates two years ago from selling.

Mortgage rates have been rising along with the 10-year Treasury yield, used by lenders to price rates on mortgages and other loans. The yield has been climbing as bond traders react to more reports showing the U.S. economy remains remarkably resilient, which could keep upward pressure on inflation, giving the Federal Reserve reason to keep interest rates higher for longer.

“If mortgage rates stay at this 7% level, I do think it’s going to be a very slow fall,” Sturtevant said.