July pending home sales rose 0.7 percent from June to the highest level since the start of the year on a seasonally adjusted basis but were still only 5.4 percent above the low point hit in March, according to Redfin.
Pending sales fell 15.7 percent year-over-year, the smallest annual decline since last summer.
Pending sales have stabilized as the shock of elevated mortgage rates has subsided. They dropped to 367,000 in March — the lowest since the onset of the pandemic — and have been hovering around that level ever since (they clocked in at 387,000 in July) as prospective buyers continue to be discouraged by high housing costs and a lack of homes for sale.
“Home sales hit a bottom in 2022 and haven’t meaningfully budged since,” Redfin Chief Economist Daryl Fairweather said in a release. “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.”
The average 30-year-fixed mortgage rate was 6.84 percent in July, up from 6.71 percent a month earlier and 5.41 percent a year earlier — and it has climbed even higher since. As of Thursday, it was 7.23 percent — the highest since 2001. That, along with stubbornly high home prices, has sent the typical homebuyer’s monthly mortgage payment up substantially from a year ago.
The median home sale price rose 1.7 percent year-over-year to $421,872 in July — the first annual increase since the start of the year. That’s just 2.5 percent below the record high of $432,476 set in May 2022, according to Redfin.
Housing prices have remained high despite sluggish homebuyer demand because there are so few homes on the market, meaning the buyers who are out there are frequently competing for a small pool of properties. The total number of homes for sale (active listings) fell 3.9 percent month-over-month in July to the lowest level on record on a seasonally adjusted basis, and dropped 19.5 percent from a year earlier. That’s the biggest annual decline in more than two years.
“It’s a seller’s market, but only because there’s so little inventory,” Salt Lake City Redfin Premier real estate agent Mitch Price said. “Buyers are getting hammered by high interest rates, so they’re not just jumping on whatever is available like they were before. They don’t want to overpay, so they’re waiting for the right home. As a seller, if you overprice your home, that’s your doomsday ticket.”
Housing supply is dwindling because high mortgage rates are dissuading homeowners from selling. New listings in July were little changed from a month earlier, rising 0.5 percent on a seasonally adjusted basis, but they were down 22.2 percent from a year earlier. Nearly every U.S. homeowner with a mortgage has an interest rate below 6 percent, prompting most to stay put because selling and buying a new home would likely mean taking on a much higher monthly payment, Redfin stated.