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Key Takeaways
- Pending home sales edged higher in July on an annual basis, and economists and real estate professionals see signs of an improvement on the horizon.
- Mortgage rates are ticking lower, while the growth rate of home prices has cooled and the amount of inventory that’s for sale is climbing.
- Mortgage application volume is also pointing higher — another positive trend.
The U.S. real estate market might be starting to thaw.
Homebuyers have been hampered with soaring home prices and high mortgage rates for years. But economists see signs that market conditions are improving for house hunters.
For instance, pending home sales, a forward-looking metric of signed contracts, edged up by 0.7% on an annual basis in July according to the National Association of Realtors. Month-to-month pending home sales did tick 0.4% lower, NAR said, but there are other positive indicators.
A similar report from real estate data firm Redfin showed that the number of pending home sales climbed 1.6% year-over-year in August.
“Buyers are circling,” said Ali Mafi, a Redfin Premier agent in San Francisco. “House hunters are feeling more confident about buying a home now that mortgage rates have started to decline.”
Mortgage rates remain stubbornly high at 6.56%, but they are at their lowest levels since October 2024, according to Freddie Mac.Additionally, the growth rate of home prices is slowing after years of shooting higher, and the number of listings on the market has increased. That gives buyers a larger inventory to choose from, and could pressure sellers to price their homes more competitively.
Recent data on mortgage applications also shows that more serious buyers are coming back onto the market. Purchase application volumes were up 2% over last week and 25% over last year, according to the Mortgage Bankers Association.
All of this may help move some potential buyers off the sidelines.
“Prospective buyers appear to be less sensitive to rates at these levels and are more active, bolstered by more inventory and cooling home-price growth in many parts of the country,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
Still, real estate agents remain cautious. NAR’s confidence index survey found that only 16% of members expect buyer traffic to improve over the next three months, while 21% expect an increase in seller traffic.
“Even with modest improvements in mortgage rates, housing affordability, and inventory, buyers still remain hesitant,” said National Association of Realtors chief economist Lawrence Yun. “People are taking their time to ensure the timing and home are right for them.”
