Contract Signings Fall, but Could Job Growth Change the Equation?

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The housing market may be giving some buyers reason to wait, as affordability challenges pushed July’s contract signings lower. But real estate pros are reporting that buyers who remain in the market are finding more room to negotiate, and those living in areas with stronger job growth have a competitive edge. 

The National Association of REALTORS®’ newly released Pending Home Sales Index—a gauge of future home sales based on contract signings—dropped 2.3% in July compared to June and was down by 2.2% from a year ago. It marks the lowest level for pending home sales since January, as affordability challenges persist. The median sales price for an existing home in July was $434,100, and 30-year mortgage rates remained elevated, averaging 6.54% last month.

“The highest mortgage rates of the year hit right in the middle of summer, and that’s pulling back contract signings,” says Lawrence Yun, NAR’s chief economist. “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.”

Related: Rising Costs Are Weighing on Home Sales This Summer

Watching the Job Market for Growth Indicators

Those local market variations are becoming more prominent, and Yun points to the latest job data as a key metric for gauging future housing demand. Markets adding jobs could see their pool of potential home buyers grow.

“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 says. “Right now, pending contracts are 30% below their pre-pandemic 2019 level, while payroll employment is 5% above. 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.”

Payroll employment is up at least 10% from pre-pandemic levels in eight states—well above the national growth rate. According to NAR data, those job-growth leaders are:

• Idaho: +14.6% from pre-pandemic levels
• Utah: +13.9%
• Nevada: +12.8%
• Texas: +12.1%
• Florida: +11.2%
• North Carolina: +10.7%
• Arizona: +10.2%
• South Carolina: +10%

For Those Who Do Buy, Opportunity Emerges

For now, home buyers in the market are reporting less competition, which is creating more room to negotiate. Realtor.com found that sellers reduced prices on 20% of active listings in July. But buyers are gaining leverage in other ways, too.

“Buyers have more leverage now than they did last summer, especially when a seller has been on the market for a few weeks or has already made a price adjustment,” says Alex Rodino, a real estate pro with Keller Williams Coastal Area Partners in Savannah, Ga. He says that leverage is showing up through seller-paid closing costs, mortgage rate buydowns, repair credits, inspection negotiations or more flexible closing timelines.

“It is not always about getting a huge discount off the price,” Rodino says. “Sometimes the real win is structuring the deal so it lowers the buyer’s cash out of pocket or makes the monthly payment more manageable.”

Still, the strongest listings remain competitive, adds Michelle Price, a real estate pro with Michelle Price Realty Group in Westlake Village, Calif. “Homes that are properly prepared, presented and priced are creating a different kind of demand, one that results in less buyer leverage,” she says. “Sellers need to be incredibly thorough in their preparation, presentation and pricing to create that demand, and buyers need to understand where the opportunities lie.”

Where Pending Sales Surged the Most in July

The following markets posted the largest year-over-year gains in pending home sales from July, according to data from Realtor.com® Economics:

• Virginia Beach-Chesapeake-Norfolk, Va.-N.C.: +17.2% annually
• San Antonio-New Braunfels, Texas: +11.8%
• Cincinnati, Ohio-Ky.-Ind.: +6.2%
• Pittsburgh, Pa.: +3.7%
• Miami-Fort Lauderdale-West Palm Beach, Fla.: +2.4%
• Austin-Round Rock-San Marcos, Texas: +1.6%
• Buffalo-Cheektowaga, N.Y.: +1.3%
• St. Louis, Mo.-Ill.: +1.2%
• Jacksonville, Fla.: +1.2%
• Columbus, Ohio: +0.2%