Contracts to buy previously owned homes in the United States slipped more than economists expected in June, a clear sign that buyers remain sensitive to today’s housing market dynamics. The latest data, released by the National Association of Realtors (NAR), shows that pending home sales, a measure based on signed contracts rather than completed deals, dipped 0.8% from May. Many analysts had actually anticipated an increase, illustrating how expectations continue to be outpaced by the ongoing pressures of affordability.
High mortgage rates remain the main culprit. Most borrowers today are staring down 30-year fixed rates well above 6.5%, with average rates in July hovering around 6.83%. This is a world away from what home buyers could lock in just a few years ago, before the Federal Reserve began raising interest rates to combat inflation. Paired with home prices that have continued to climb, it’s no wonder buyers are moving cautiously.
In fact, prices have hit a new high. The median cost for an existing home in June reached $435,300, up 2% year-over-year, according to the NAR report. Sellers who already own homes (especially those with lower mortgage rates), see little incentive to move unless they absolutely have to. This phenomenon, often referred to as “rate lock-in,” keeps supply on the lower side, even as inventory has ticked up 15.9% since June last year, totaling 1.53 million homes at the end of the month. At the current sales rate, that is about 4.7 months of supply, which is still below what many experts say is a balanced market.
Despite more options on the market, demand isn’t surging. Total existing home sales fell to a seasonally adjusted annual rate of 3.93 million units in June, a 2.7% drop from May. The decline was even sharper for single-family homes, while condos held steady. With cancellations rising as well, nearly 15% of pending home sales fell through in June, climbing from last year’s level of 13.9%, today’s market landscape favors buyers who are willing to shop around and even walk away if a deal doesn’t fit their budget or if inspection and financing hurdles pop up.
Geographically, the slowdown hasn’t hit every region equally. Sales dipped the most in the Northeast, Midwest, and South, but the West saw modest gains. That uneven picture points to the fact that real estate remains intensely local, with employment trends, population growth, and local policy all playing roles beyond the national numbers.
Looking forward, most forecasts anticipate that mortgage rates will stay high for a while yet. Fannie Mae, for instance, expects the 30-year fixed rate to average above 6.4% through the rest of 2025, with no dramatic drops in sight barring significant shifts in the broader economy or changes in Federal Reserve policy.
While homeowners may take some comfort in the rising value of their properties, first-time buyers are feeling squeezed out. Higher rates and home prices have shut many out of the market, and unless there’s a meaningful move lower in borrowing costs or a sharp rise in inventory, affordability will likely remain the defining challenge for the rest of the year.
For those hoping for a turnaround, perhaps triggered by a jump in housing supply or a retreat in interest rates, the prevailing wisdom is that patience will be required. As Lawrence Yun, NAR’s chief economist, notes, “High mortgage rates are causing home sales to remain stuck at cyclical lows.” Until costs come down or more homes enter the pipeline, it seems buyers and sellers alike will be treading water.
