Pending home sales rose 0.7% from June to July, reversing 7 months of declines. However, rising rates and home prices are poised to stifle sales growth into the fall, Redfin said on Friday
After several months of double-digit monthly declines, pending sales finally rebounded in July — albeit by only 0.7 percent.
Pending sales reached a 2023-high of 387,000 in July, according to Redfin’s latest housing market report published Friday. The month’s performance is a reversal from the three-year low of 367,000 in March; however, they’re still down 15.7 percent annually as erratic mortgage rates force buyers to pull out of the market.
“Home sales hit a bottom in 2022 and haven’t meaningfully budged since,” Redfin Chief Economist Daryl Fairweather said in a written statement. “Fading recession fears and the prospect of further home price increases have brought some house hunters off the sidelines, but for the most part, buyers remain hesitant to jump into the market because their buying power is so much lower than it was a year ago.”
Average 30-year fixed mortgage rates reached 6.84 percent in July — 0.13 percentage points higher than June and 1.43 percentage points higher than July 2022. Rates skyrocketed to a 22-year high in August at 7.23 percent.
In addition to rising rates, the report said homebuyers must contend with median home sale prices finally rising after seven consecutive months of declines. The median home sale price rose 1.7 percent year over year to $421,872, only 2.5 percent below May 2022’s record high of $432,476.
The report said rising mortgage rates and home prices have also gut-punched would-be homesellers, as they’re hesitant to let go of the record-low mortgage rates they secured in 2020 and 2021. As a result, active listings declined 3.9 percent month over month and 19.5 percent year over year to the lowest level on record on a seasonally adjusted basis.
New listings didn’t fare much better, rising only 0.5 percent month over month on a seasonally adjusted basis. However, they were still down 22.2 percent from July 2022.
Declines in pending sales, closed sales, listings and supply were most pronounced in Connecticut, with Bridgeport and New Haven both experiencing double-digit declines of at least 30 percent across all four metrics. Austin experienced the largest decline in home prices (-10.5 percent), followed by Detroit (-7 percent) and Honolulu (-6.2 percent).
“It’s a seller’s market, but only because there’s so little inventory,” Salt Lake City Redfin Premier real estate agent Mitch Price said in the report. “Buyers are getting hammered by high-interest rates, so they’re not just jumping on whatever is available like they were before. They don’t want to overpay, so they’re waiting for the right home.
“As a seller, if you overprice your home, that’s your doomsday ticket,” he added.