Buyers are staying on the sidelines even as mortgage rates fall
Pending home sales slid in all four US regions last month, with a 5.5% monthly decline in sales activity across the country bringing a key gauge to its lowest level on record.
The National Association of Realtors (NAR) said on Thursday morning that its Pending Home Sales Index, which measures pending sales based on contract signings, plunged to 70.2 in July, a low not seen since the measure began tracking data 23 years ago.
Pending transactions slumped by 8.5% compared with the same month last year, according to the NAR, in a further sign that high borrowing costs are continuing to weigh down on the US housing market despite a recent dip in mortgage rates.
The association’s chief economist Lawrence Yun said in a statement accompanying the release that a “wait-and-see” approach appeared to be taking hold as buyers look ahead to the potential economic impact of the upcoming presidential election, scheduled for November 5.
He highlighted the New England region as one of the few causes for optimism in the national market, with that area performing “relatively better” than others in recent months.
The South and Midwest fared particularly poorly in the latest pending homes data, with their PHSIs falling by 11.5% and 11.4% respectively on a year-over-year basis. The West retreated by 6% compared with July 2023, while the Northeast posted a mild yearly increase – but fell by 1.4% from the prior month.
Overall mortgage applications are faring little better, with this week’s data from the Mortgage Bankers Association (MBA) showing that application volume across the country inched upwards by just 0.5% last week.
The sluggish pace of activity continued despite a further drop in the average 30-year fixed mortgage rate to 6.44%, the fourth week in a row that rates have fallen.
The retreat in pending home sales may also have some way to go yet, according to First American deputy chief economist Odeta Kushi.
She said even with rates slipping in recent weeks, a “modest improvement in affordability” may not result in an uptick in demand with household budgets still squeezed. “Homebuying will not pick up meaningfully until income growth begins to outpace home price growth and mortgage rates move lower.”
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