Pending Home Sales Drop 2.3% in July as Mortgage Rates Pressure Buyers

Pending Home Sales Drop 2.3% in July to Lowest Level Since January

Pending home sales fell 2.3% in July from the previous month, pushing contract activity to its lowest level since January as higher mortgage rates and elevated home prices pressured buyers during the summer market.

The National Association of Realtors said pending sales were also down 2.2% from July 2025. Contract signings declined month over month in all four major U.S. regions, with the West recording the sharpest pullback.

The decline matters for the mortgage market because pending sales measure signed contracts on existing homes and generally lead completed sales by one or two months. Weak contract activity in July could therefore translate into softer purchase mortgage demand and closings heading into late summer and early fall.

Two Months of Declining Contract Activity

July extended a sharp June slowdown, when pending home sales fell 5.4% from May. Taken together, the two monthly declines imply that contract activity was roughly 7.6% below its May level by the end of July.

NAR's Pending Home Sales Index fell to 71.2 in July. An index reading of 100 corresponds to the level of contract activity in 2001. NAR estimates its pending-sales data cover about 40% of monthly multiple listing service activity.

NAR Chief Economist Lawrence Yun attributed much of the summer pullback to borrowing costs.

“The highest mortgage rates of the year hit right in the middle of summer, and that’s pulling back contract signings,” Yun said.

Freddie Mac data show how quickly rates moved during July. The average 30-year fixed mortgage climbed from 6.43% on July 2 to 6.66% on July 30. NAR calculated the average 30-year rate for July at 6.54%, up from 6.49% in June.

That increase arrived while home prices remained elevated. The median price of an existing home reached $434,100 in July, up 2% from a year earlier and marking the 37th consecutive month of year-over-year price gains, according to NAR.

For buyers financing a purchase, that combination means affordability can remain constrained even when broader housing-market conditions become less competitive.

West Posts the Largest Decline

The slowdown was nationwide on a monthly basis, but the magnitude varied significantly by region.

The West posted both the largest monthly decline and the steepest year-over-year contraction. The Midwest was the only region where pending sales remained above year-earlier levels.

Local results were considerably more uneven than the national figures. Among the 50 largest metropolitan areas, NAR cited year-over-year pending-sales increases of 17.2% in Virginia Beach-Chesapeake-Norfolk and 11.8% in San Antonio-New Braunfels, illustrating how local affordability, inventory and employment conditions can diverge from the national trend.

Buyers Have More Leverage, but Affordability Remains the Constraint

Other July housing data suggest the market is becoming more negotiable for buyers even as affordability continues to suppress transaction volume.

Realtor.com reported that 20% of active listings received a price reduction in July. The national median list price was $428,950, down 2.4% from a year earlier, while active inventory increased 2.1%.

Those conditions can give buyers more choices and bargaining power, but lower asking prices do not necessarily offset the payment effect of mortgage rates in the mid-6% range.

NAR's separate existing-home sales report reinforces that tension. Completed existing-home sales fell 1.7% in July to a seasonally adjusted annual rate of 4.06 million, although they remained 0.7% above the prior-year level. Inventory stood at 1.54 million homes, equivalent to a 4.6-month supply.

A Large Gap From the Pre-Pandemic Market Remains

Despite employment growth since 2019, housing contract activity remains far below its pre-pandemic level.

Yun said pending contracts are approximately 30% below their 2019 level even though payroll employment is about 5% higher. He argued that the gap reflects substantial pent-up housing demand that could emerge if additional inventory and improved affordability allow more households to buy.

That distinction is important for mortgage lenders: weak transaction volume does not necessarily mean the underlying desire to purchase homes has disappeared. Instead, the July data indicate that financing costs and home prices continue to limit how much of that demand can convert into applications and closed loans.

There has been modest rate relief since July. Freddie Mac reported that the average 30-year fixed mortgage was 6.65% as of August 20, down from 6.67% a week earlier and 6.69% on August 6.

Whether that easing is enough to revive contract activity will depend on how rates, prices and available inventory move through the remainder of the summer.

NAR is scheduled to release its August pending home sales data on September 10, providing the next indication of whether July represented the low point of the summer slowdown or the beginning of a weaker stretch for purchase activity.