Metro Denver’s housing market normally softens as the summer wears on, but this year it is cooling faster than normal. Higher borrowing costs are a likely culprit.

The number of homes sold in the metro area dropped 15.6 percent in July from June, and year-over-year the decline is 8.5 percent, according to a monthly report from the Denver Metro Association of Realtors.

Historically, the average drop between July and June runs around 5 percent. A year ago, the market suffered an even bigger 19.7 percent monthly drop between June and July, but managed to regain its footing.

Interest rates on a 30-year mortgage back then were a more favorable 3.9 percent, according to Freddie Mac. They now run closer to 4.6 percent and are rising, knocking more buyers out of the running.

“It’s not time to panic, but this market is showing signs of cooling, and Realtors need to manage seller’s expectations as market conditions change,” advised Steve Danyliw, chairman of the DMAR Market Trends Committee, in the August Denver Metro Real Estate Market Trends Report.

The inventory of homes and condos available for sale at the end of July rose 4 percent to 7,643. That is still under half the historical average for metro Denver, but it represents the biggest supply for a July in three years, Danyliw said in his report.

Home price increases are also showing signs of leveling off. The median price of a single-family home sold in July was $450,000, a decline of 0.3 percent from June. Compared to a year ago, the median price of a home sold is still up 7.14 percent.

The median price of a condo sold dropped 1.6 percent between June and July to $300,000. Year-over-year, condo prices remains up nearly 11 percent.

A survey of young adults from real estate research firm CoreLogic found that the lack of affordable options for entry-level buyers are keeping them out of the market. CoreLogic considers Denver among an “overvalued” market.

“One-third of millennial renters reported feeling they cannot afford a down payment to buy a home,” Frank Martell, president and CEO of CoreLogic, said in a report. “More needs to be done to help our first-time buyers join the homeownership class.”