Pending home sales reached a record low last month, even as mortgage rates declined slightly, according to a report by the National Association of Realtors (NAR). The NAR’s Pending Home Sales Index revealed a 5.5% drop in July and an 8.5% decrease compared to last year, marking the lowest level since the index was established in 2001.
This decline is attributed to the continued high home prices and limited housing supply, which have kept many potential buyers on the sidelines. While mortgage rates have decreased, they remain above 6%, far higher than the 3% rates seen in 2021, leading to a “lock-in effect” where homeowners with lower rates are reluctant to sell.
Many buyers are in a “wait-and-see” mode, anticipating further drops in mortgage rates later this year, driven by slowing inflation and potential Federal Reserve rate cuts. However, NAR suggests that even if mortgage rates decline, home prices may not drop as more buyers re-enter the market.
