Pending home sales in the U.S. ticked down by 0.4% in July from the prior month, a sign of continued sluggishness in the real estate market as elevated home prices and mortgage rates discourage buyers. Despite the monthly downturn, sales increased 0.7% compared to July 2024, according to data from the National Association of Realtors (NAR).
Regions diverged, with pending sales falling month-over-month in the Northeast and Midwest while rising in the West. Pending sales were basically flat in the South. NAR’s data also indicated weak confidence, with a minority of realtors expecting an increase in buyer and seller traffic – 16% and 21%, respectively.
The NAR data is based on pending sales of existing homes. A sale is pending when the contract has been signed but before the transaction has closed, which usually follows within one or two months of signing.
“Even with modest improvements in mortgage rates, housing affordability, and inventory, buyers still remain hesitant,” NAR Chief Economist Lawrence Yun said in a statement.”The Federal Reserve signaling that they may enact a lower interest rate policy should steadily enlarge the pool of eligible home buyers in the upcoming months,” he added.
Part of the problem is that the real estate market is suffering from “lock-in,” where homeowners who secured low, fixed-rate mortgages in years past are reluctant to sell. The average 30-year fixed mortgage rate has eased to 6.56%, according to Freddie Mac. That rate is at a 10-month low but is still more than double the rate at the end of 2021.
The current market lethargy started in spring, with increasing mortgage rates and macroeconomic uncertainty leading to a historically slow start to the homebuying season. In a Bank of America survey released in May, 60% homeowners and prospective buyers indicated that they don’t know whether it’s a good time to buy a home, the highest level of uncertainty since 2023.
The NAR findings come after the Census Bureau reported last week that sales of new single-family houses in July were at a seasonally-adjusted annual rate of 652,000 dropping 0.6% from the previous month and 8.2% compared to July 2024.
A stagnant labor market is among the factors weighing on demand for new homes. Although unemployment remains low and companies aren’t laying off many workers, hiring is sluggish as businesses are “hoarding” labor. The U.S. added a seasonally adjusted 73,000 jobs in July, below the expected gain of 100,000 jobs, according to the Labor Department.