Mortgage rates are finally dropping, but pending home sales fell even further into the toilet in July.
That’s according to the July pending home sales index from the National Association of Realtors. On an annual basis, the index fell by 8.5% to the second lowest seasonally adjusted rate in the data’s history, topping only April of 2020 when the market was frozen by the pandemic.
The index fell by 5.5% month over month to 70.2. Anything above 100 is considered to have a higher level of activity relative to 2001.
“A sales recovery did not occur in midsummer,” said NAR Chief Economist Lawrence Yun in a statement. “The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election.”
In addition to the election, there are a number of reasons why buyers might be hesitant to jump back into the market. While rates are falling, they’re still high relative to recent history. With the Federal Reserve almost certain to cut rates in September, buyers might do well to wait a couple months.
Some buyers also are considering the recent rule changes related to the $418 million settlement of antitrust lawsuits signed by NAR. Buyers are accustomed to sellers paying for their agents, so shoppers who’ve bought a home before feel uncertain about how to navigate the new landscape.
Then there’s the obvious — affordability remains incredibly strained, with home prices at or near all-time highs in most markets.
Despite the disappointing numbers for July, economists expect the slump to be short lived as rates drop further, the election passes and shoppers get more accustomed to the new rules.
“With rates set to drop beginning next month and expected to continue declining through the remainder of the year, we expect America to be on the move again soon,” said Move Concierge CEO Gabe Abshire in a statement. “It will take a month or two longer, however, until we see home sales beginning to trend back upward. But we believe the market will turn.”
On a month over month basis, the index fell in all four regions of the country with the midwest (7.8%) and the south (6.5%) falling the most. The west fell by 3.8%, while the northeast dropped by a more modest 1.4%. The south posted the highest index number at 83.5, and the west posted the lowest at 56.2.
However, the numbers are more mixed on a year over year basis, with pending home sales rising in the northeast but falling in the midwest, south and west.
