Pending home sales increased 0.7% in July from a month earlier on a seasonally adjusted basis, but are still just 5.4% above their low point in March, with year-over-year pending sales dropping 15.7%, the smallest annual decline since last summer, according to a report from Redfin.

Buyer Remain Hesitant

As the shock of elevated mortgage rates has subsided, pending sales have stabilized at around 367,000 per month since March. This is the lowest since the pandemic began, as high housing costs andܫ a dearth of🌊 homes discourage prospective buyers.

“Fading recession fears and the prospect of further home price increases have brought some house hunters off the sidelines, but for the most part, buyers remain hesitant to jump into the market because their buying power is so much lower than it was a year ago,” said Redfin Chief Economist Daryl Fairweather.

Demand Is Low, But Supply Is Lower

Due to the low inventory of properties on the market, home prices have remained high despite sluggish demand from homebuyers. Seasonally adjusted, active listings fell by 3.9% month over month in July to the lowest level on record and by 19.5% from a year earlier, marking the largest annual decline in over two years.

Inventory is dwindling because high mortgage rates discourage homeowners from selling. A majority of homeowners have mortgages with rates below 6%, which leads them to stay put rather than move since a new home would mean a much higher monthly payment. For this reason, new listings in July were largely unchanged from the previous month, rising 0.5% on a seasonally adjusted basis, but they were down 22.2% from a year earlier. 

Active listings fell the most from a year earlier in Bridgeport, Connecticut, down 49.8%; Boise, ID, down 47.2%; and Hartford, down 46.7%. 

Interest Rates Discourage Potential Buyers

The average 30-year-澳洲幸运5官方开奖结果体彩网:fixed mortgage rate in July was 6.84%, up from 6.71% a month earlier and 5.41% a year earlier, and it has continued to rise🌄. The median home sale price rose 1.7% year over year to $421,872 in July, just 2.5% below the record high💜 of $432,476 set in May 2022, making the typical buyer’s monthly mortgage payment up considerably from a year ago.

"Two factors are driving current sales activity—inventory availability and mortgage rates," said Lawrence Yun, the NAR's chief economist. "Unfortunately, both have been unfavorable to buyers."

"Forecasting mortgage rates in the near term is very difficult, but it's our expectation that mortgage rates will begin to normalize next year," said Matthew Walsh, an economist at Moody's Analytics.

Better interest rates could 🎃motivate homeowners to sell their homes and search for something new; however, interest rates are unlikely to compare to pandemic rates again.