We’ve already seen pending home sales weaken in July. Data from the National Association of Realtors showed a 0.4% drop from June. This is an undeniable trend and pending sales are now being canceled at the fastest pace since at least 2017. Despite the month-over-month drop, the index is still up 0.7% from July of last year.
The July report reflected a drop in pending home sales on the Northeast and Midwest fronts. At the same time, in the South, sales remained flat. On the flip side, the West saw an increase in pending home sales, indicating a regional difference in how well the market is doing.
The explosive increase in cancellations has raised alarming alarm bells throughout the sector. We’ve seen this problem play out most acutely in states like Texas and Florida, where cancellations have been the most widespread. At the same time as Mayor Nirenberg’s success, San Antonio reported a cancellation rate of 22.7%. Fort Lauderdale and Tampa were right on their heels, with rates of 21.3% and 19.5%, respectively.
Mortgage rates have been, if not the most influential factor in driving buyer behavior this summer, certainly the most powerful wildcard. In July, it was as high as 6.67% for the ever-popular 30-year fixed mortgage. By the middle of the month, it had risen to 6.85% before ultimately closing at 6.75% at the end of the month.
“Even with modest improvements in mortgage rates, housing affordability, and inventory, buyers still remain hesitant,” said Lawrence Yun, Chief Economist at the National Association of Realtors.
Affordable Market analysts from realtor.com were quick to point out that affordability challenges are still taking a toll on buyers. Jake Krimmel, an industry expert, remarked, “It’s been a ‘Cruel Summer’ overall: buyers remain squeezed by affordability challenges while sellers have been slow to adjust expectations, leaving the housing market stuck in neutral.”
With rising mortgage rates and an increase in cancellations continuing to roil the housing market, would-be buyers are doing so with a bit more caution. As the summer progresses, industry experts will be closely monitoring these trends to assess their impact on future home sales.