Andrew Harrer/Bloomberg News
Pending sales of existing homes dropped in June, dimming hopes for a summer surge in the housing market as affordability concerns continue to sideline buyers.
The Pending Home Sales Index, based on signed contracts for existing homes, dropped 0.8% last month from May, and declined 2.8% year-over-year, the National Association of Realtors® reported on Wednesday.
“The data shows a continuation of small declines in contract signings despite inventory in the market increasing,” says NAR Chief Economist Lawrence Yun.
The decline in contract signings, which usually precede sales by one or two months, followed a historically weak spring housing season, which put the market on track to hit a 30-year low in home sales this year, according to a forecast from the Realtor.com® economic research team.
Although the supply of homes for sale is rising, with the national count of active listings up 29% in June from a year ago, buyers remain reluctant.
Fannie Mae’s June survey of homebuyers found purchase sentiment declined in June, with just 28% saying it is a good time to buy.
Affordability remains a key concern, with elevated mortgage rates and record-high home prices sidelining many buyers.
Average 30-year mortgage rates eased slightly in June, dropping to 6.77% at the end of the month, from 6.89% at the end of May, according to Freddie Mac. The national median sales price for existing homes hit an all-time high of $435,300 in June, up 2% from a year ago, according to NAR.
“Affordability is a major challenge for home buyers right now,” says Bright MLS Chief Economist Lisa Sturtevant. “Prospective home buyers are increasingly anxious about the overall economy and their own personal financial situations.”
However, the new pending sales data shows that the Northeast—where home prices are rising the fastest—was the only region to see a monthly boost in contract signings, which rose 2.1% from May.
Pending sales dropped on a monthly and annual basis in the Midwest, South, and West. The Northeast was flat compared to a year ago.
For homebuyers waiting for conditions to improve, unfortunately there are few signs of relief on the horizon.
Although home prices have begun to soften or even decline in many markets in the South and West, most housing economists believe a sharp national correction in home prices remains unlikely. The Realtor.com economic research team forecasts national home prices will grow 2.5% through 2025.
Rather than dropping their asking prices, many home sellers now appear to have opted to wait out the market. Realtor.com recently reported that delistings surged 47% in May compared with a year earlier, suggesting that sellers increasingly prefer to wait rather than negotiate.
As well, mortgage rates have remained stuck above 6.6% all year, with little sign of relief on the horizon.
The Federal Reserve is expected to keep its benchmark rate unchanged when it announces its next policy decision on Wednesday afternoon.
Even a Fed cut in September may not move mortgage rates much, if inflation fears continue to weigh on the long-term bond prices that help determine mortgage rates.
“Unfortunately, there is little to suggest any sort of major rebound in home sales as we head into fall,” says Sturtevant. “As a result, I think it is likely that 2025 will continue to be a ‘stuck’ housing market with both buyers and sellers waiting until 2026 for more certainty.”