Home buyers may have more negotiating power today as more listings appear on the market, but the National Association of REALTORS®’ analysis shows most buyers are taking their time before signing contracts, while pending home sales numbers have yet to turn the corner.
Housing inventories are at their highest level since 2020, and home prices are increasing at their slowest pace since 2023. Mortgage rates have also moderated somewhat. Yet, pending home sales—a forward-looking indicator of home sales based on contract signings—remained mostly flat last month, falling slightly by 0.4% in July compared to June, but eking out a 0.7% gain compared to a year ago, NAR reported on Thursday.
“Even with modest improvement in mortgage rates, housing affordability and inventory, buyers still remain hesitant,” says Lawrence Yun, NAR’s chief economist. “Buying a home is often the most expensive purchase people will make in their lives. This means that going under contract is not a decision home buyers make quickly. Instead, people take their time to ensure the timing and home are right for them.”
There are signs that more prospective home buyers are watching the market carefully, even if from the sidelines. Mortgage applications for home purchases have consistently risen by double-digit percentages compared to a year ago in recent weeks.
“Rising mortgage applications for home purchases are an early indicator of more serious buyers in the marketplace, though many have not yet committed to a pending contract,” Yun says. “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.”
Buyer Opportunity?
Throughout spring and summer, buyers across the country have largely exercised caution in what is traditionally real estate’s busiest seasons.
“Home buyers are in the best position in more than five years to find the right home and negotiate for a better price,” Yun said while reporting on the latest existing-home sales data. NAR reports a modest 2% gain in existing home sales in July compared to June and a slight rise from 2024’s sales numbers.
That “ever-so-slight improvement in housing affordability is inching up home sales,” Yun said last week. “Wage growth is now comfortably outpacing home price growth, and buyers have more choices.” Additionally, about half of the country is experiencing price reductions, he notes. (Read more: Listing Price Reduction? How to Navigate It With Buyers, Sellers)
Regional Outlook
Pending home sales defied the trend last month in the West, with more buyers going under contract, according to NAR’s index. Even with a nearly 4% month-over-month uptick, the West still saw pending home sales down by about 2% compared to last year.
Here’s a closer look at how pending home sales fared in July, according to NAR’s index:
- Northeast: Pending home sales fell 0.6% in July compared to June and were also down by 0.6% compared to a year ago.
- Midwest: Contract signings fell 4% in July but were up by 1.3% compared to last year.
- South: Pending home sales were down slightly by 0.1% in July compared to June but still posted a 1.8% uptick compared to July 2024.
- West: Pending home sales rose 3.7% in July month-over-month but were down 1.9% compared to a year ago.
