Contract signings dropped to the lowest level on record last month, but pent-up buyer demand could be waiting for opportunities to open up.
Contract signings fell last month to the lowest level on record, as the housing market continued trudging through a sluggish summer. The National Association of REALTORS®’ newly released Pending Home Sales Index—a forward-looking indicator of home sales based on contract signings—dropped 5.5% in July and was down 8.5% compared to a year earlier.
“A sales recovery did not occur in midsummer,” says Lawrence Yun, NAR’s chief economist. “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.”
Some prospective home buyers also may be waiting for mortgage rates to drop. Federal Reserve Chair Jerome Powell announced late last week that the “time has come for policy to adjust,” a signal to the market that an interest rate cut is likely at the Fed’s next, mid-September meeting. While the Fed’s rate does not directly impact mortgage rates, it can have an influence—although economists say it’s debatable by how much.
Still, some home buyers may wait until the fall to wait-and-see if any potential drop could improve housing affordability. Nirvan Ghosh, portfolio manager at The Palisades Group, says that the Fed could make at least four rate cuts before year-end, and that could then bring mortgage rates lower than their current mid-6% averages. What’s more, home buyers may find more choices as a greater number of listings hit the market: Inventory levels were up 20% in July compared to a year ago, according to NAR.
“Our expectation is that this expected drop in mortgage rates will continue to put pressure on housing prices given the pent-up demand from folks who have been sitting on the sidelines, more than offsetting any increase in supply,” Ghosh says.
Pending Home Sales By Region
All four major regions of the U.S. posted monthly losses in contract signings in July, NAR reports. The Northeast was the only region to see pending home sales rise on a year-over-year basis, up 2.4% compared to July 2023.
“The New England region has performed relatively better than other regions in recent months,” Yun says. “Current lower, falling mortgage rates will no doubt bring buyers into the market.”
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