Homebuyers Aren’t Yet Reacting to Lower Mortgage Rates, With Pending Sales Posting Biggest Year-Over-Year Decline in 9 Months

Monthly housing payments have dropped to their lowest level in four months, but homebuyers and sellers aren’t yet reacting. In addition to pending home sales falling, new listings posted their smallest increase in three months. 

The median U.S. monthly housing payment was $2,667 during the four weeks ending July 28, its lowest level since March. Payments are declining because mortgage rates and sale prices are falling: The weekly average mortgage rate is 6.78%, down from May’s five-month high of 7.22%. The median home-sale price is $392,563, down nearly $4,000 from its early July peak (that’s a typical seasonal decline and not a signal that prices are falling unexpectedly). 

Despite improving affordability, pending home sales are down 5.7% year over year, the biggest decline in nine months, and mortgage-purchase applications are down 14% (purchase applications are down 2% week over week). That’s largely because even though it’s more affordable to buy a home now than it was in the spring, prices and payments are still near record highs. Additionally, Redfin agents report that some prospective buyers, wary of political uncertainty, are waiting until after the presidential election to purchase a home. 

Another reason for dwindling sales is a lack of desirable listings. New listings are up 4% year over year, but they’re losing momentum; that’s the smallest increase since November.  And many homes for sale have been sitting on the market for at least 30 days without going under contract, indicating that many of today’s listings don’t match the wants and/or needs of house hunters. Much as pending sales are declining partly due to new listings losing steam, the slowdown in new listings is partly due to limited demand.  

But local agents report that there is plenty of demand for turnkey homes in desirable neighborhoods, and some expect sales to pick up soon as mortgage rates come down.

“Local buyers are still worried about affordability, especially since wages haven’t caught up with home-price growth and inflation has cut into their budgets. But now that rates are declining, some fence-sitters are getting off the fence,” said Boise, ID Redfin agent Nicole Stewart. “I’m working with some buyers who need larger homes to accommodate growing families, some who are relocating from California, Washington or Oregon, and some who are taking advantage of all the new builds in our area.”