Housing Market Slows As Home Buyers Wait

Contract signings hit an all-time low last month, as the housing market continues to face challenges. Despite increased inventory and solid job growth, affordability concerns and the uncertainty around the U.S. presidential election have stopped many prospective home buyers from taking action. Pent-up buyer demand remains, but for now, many are waiting for the right conditions. In July, the National Association of REALTORS® reported a 5.5% drop in the Pending Home Sales Index, bringing it down to 70.2. This marks an 8.5% decline from last year’s numbers. With mortgage rates still high, hovering in the mid-6% range, some buyers are delaying their purchases, hoping that future rate cuts will offer better affordability.

Buyers Holding Out For Lower Rates

Mortgage rates have become a big factor in the current housing market. While rates are averaging in the mid-6% range, there’s hope that the Federal Reserve’s anticipated rate cuts will offer relief. Experts predict several rate reductions before the year’s end. Such cuts could ease some of the financial burdens on buyers.

Main factors influencing buyer behavior:

• Mortgage rates: Currently averaging mid-6%.
• Fed’s potential rate cuts: Expected to bring mortgage rates down.
• Inventory boost: Housing inventory increased 20% in July compared to the previous year.

Many potential buyers are waiting to see if mortgage rates drop in the fall. This could improve housing affordability and spark renewed interest. Something we need.

Also Read: The Changing Real Estate Market: Statistics You Need To Know

Many Potential Home Buyers Are Waiting

Regional Pending Home Sales Decline

All major regions experienced a drop in contract signings in July, with the exception of the Northeast (which showed a slight year-over-year increase). Here’s how the numbers play out by region:

• Midwest: Index at 67.8, down 7.8% month-over-month.
• Northeast: Index at 64.6, down 1.4% month-over-month, but up 2.4% year-over-year.
• West: Index at 56.2, down 3.8% month-over-month.
• South: Index at 83.5, down 6.5% month-over-month.

Despite these declines, the Northeast stands out with its year-over-year improvement. That is a positive sign that lower mortgage rates could encourage more buyers to act. Fingers crossed.

Outlook For The Housing Market

While contract signings have hit record lows, the housing market’s outlook isn’t entirely bleak. As more listings hit the market and mortgage rates potentially fall, buyers who have been waiting on the sidelines may finally jump in. And that’s what we need. With inventory up 20% compared to last year, and the potential for multiple rate cuts before year-end, the second half of 2024 could bring much-needed relief to home buyers. At the moment, we’re all just waiting to see what happens. But when things start looking up, hopefully we’ll see a turnaround in the housing market. There is a lot of pent-up demand, so it will be interesting to see how this plays out.

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