Pending home sales show slight annual gain in July

Homebuyers remained hesitant in July, despite the slight decrease in mortgage rates and uptick in inventory, according to the National Association of Realtors’ (NAR) Pending Home Sales Index released Thursday. 

Nationwide, the index fell to a value of 71.7, down 0.4% from June. On an annual basis, however, pending home sales were up 0.7%. 

An index reading of 100 is equal to the level of contract activity in 2001.

“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 homebuyers make quickly,” Lawrence Yun, the chief economist at NAR, said in a statement. “Instead, people take their time to ensure the timing and home are right for them.”

This uptick in inventory and slower pace of home sales is a decided shift from the initial post-pandemic seller’s market, but economists are hesitant to call it a true buyer’s market. 

“Instead, we are in a ‘stuck’ market, which is likely where we will stay as we head into fall. Sellers are feeling stuck because they are not getting the offers they want,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “Bright MLS’s recent analysis found that a key reason sellers are delisting their home is because their price expectations are not being met. Buyers are feeling stuck because, although there is more inventory, home prices are still high and affordability is still a hurdle.”

Regionally, the Pending Home Sales Index was down month-over-month in the Northeast (64.3), Midwest (70.2) and the South (86.1), with decreases of -0.6%, -4.0%, and -0.1%, respectively.

The West saw pending home sales rise on a monthly basis in July jumping 3.7% to a reading of 56.3. On a yearly basis, pending home sales fell in the Northeast (-0.6%), and the West (-1.9%), but rose in the Midwest (1.3%) and South (1.8%). 

NAR also reported data for its Realtors’ Confidence Index, which shows that 16% of NAR members expect an increase in buyer traffic over the next three months, the same as a year ago. On the sell-side, 21% of members expect to see an increase in seller traffic up from 17% a year ago. 

Looking ahead, Yun and Sturtevant are both anticipating that the Federal Reserve will cut interest rates in September, but they have differing opinions as to how this may impact the housing market. 

“Rising mortgage applications for home purchase are an early indicator of more serious buyers in the marketplace, though many have not yet committed to a pending contract,” Yun said in a statement. “The Federal Reserve signaling that they may enact a lower interest rate policy should steadily enlarge the pool of eligible homebuyers in the upcoming months.”

In contrast, Sturtevant said that despite the anticipated cut, it is not certain that mortgage rates will come down. 

“As a result, buyers and sellers are still going to be cautious and the market could remain gridlocked this fall,” she said.