Contract signings are cooling as buyers stay on the sidelines.
Pending home sales fell 2.3 percent in July, dropping to their lowest level since January, as the year’s highest mortgage rates weighed on contract signings, according to the National Association of Realtors.
The monthly decline followed a 2.2 percent drop from a year earlier. Contract activity fell in all four major U.S. regions from June, though the Midwest was the only region to post a year-over-year gain, up 1.7 percent.
Lawrence Yun at Inman On Tour Nashville | Credit: AJ Canaria Creative Services
“The highest mortgage rates of the year hit right in the middle of summer, and that’s pulling back contract signings,” NAR Chief Economist Lawrence Yun said in a statement. “Home prices are at record highs, so houses for sale are sitting on the market longer, and fewer buyers are bidding above the asking price than a year ago, though there are large local market variations.”
Regionally, the West posted the steepest year-over-year decline at 7.1 percent, followed by the South at 3 percent and the Northeast at 0.2 percent. Month-over-month, the West also fell hardest, down 4.7 percent, while the Midwest saw the smallest monthly pullback at 0.7 percent.
Despite the slowdown, Yun pointed to underlying demand that has yet to materialize into signed contracts. Pending sales remain 30 percent below their pre-pandemic 2019 level, he said, even as payroll employment sits 5 percent above that benchmark.
“Job gains should bring more buyers into the market, especially if mortgage rates stabilize or decline, though that impact takes time to show up,” Yun said. “That gap points to sizable pent-up demand that should be unleashed in the coming years as more supply reaches the market and affordability improves.”
Among the 50 largest U.S. metro areas, Virginia Beach-Chesapeake-Norfolk, which spans Virginia and North Carolina, posted the largest annual gain in pending sales at 17.2 percent, followed by San Antonio-New Braunfels, Texas, at 11.8 percent, according to data from Realtor.com Economics cited in the release.
