Pending Home Sales Fall 2.3% in July, Second-Worst Reading Since 2001

Pending home sales fell 2.3% in July compared to June, and are down 2.2% from a year ago, according to the National Association of Realtors. The index landed at 71.2, matching the second-worst reading in NAR data going back to 2001, according to ZeroHedge's analysis of the report.

Economists polled by The Wall Street Journal expected a 0.6% increase, according to Morningstar. The actual reading fell short. The miss wasn't small.

NAR Chief Economist Lawrence Yun didn't dance around it. "The highest mortgage rates of the year hit right in the middle of summer, and that's pulling back contract signings," Yun said in the NAR report. "Home prices are at record highs so houses for sale are sitting on the market longer, and fewer buyers are bidding above the asking price than a year ago."

The numbers behind that statement are ugly. Mortgage rates rose from 6.43% at the start of July to 6.69% by early August, according to Real Estate News. That's the highest level in a year, according to NPR. Every one of the four major U.S. regions saw contract signings drop for the month.

The West got hit hardest, down 4.7% month-over-month and 7.1% year-over-year, according to Real Estate News, landing at what Wolf Street's analysis, cited by Ground News, called a record low for that region. The South fell 2.2% for the month and hit its lowest level since January 2025, according to ZeroHedge. The Northeast dropped 2% for the month, according to Morningstar.

This is not a one-month blip. June's decline was revised to a 4.8% drop, according to Ground News' aggregation of NAR data. The housing market has now posted back-to-back monthly declines heading into the back half of 2026.

The existing home sales numbers that came out alongside this tell the same story. Sales of previously owned homes fell 1.7% in July, according to AP News and NPR. The average home sold for just over $434,000, according to NPR. Home prices are still climbing even as fewer people can afford to buy.

Charlie Dougherty, senior economist at Wells Fargo, told NPR the housing market "is still on the mat, pinned down by really challenging affordability conditions." Add a softening job market to record prices and rates near 6.7%, and you get exactly what happened in July: buyers walking away from the table.

First-time buyers are getting squeezed out entirely. Their share of home purchases shrank last month, according to NPR. Meanwhile sales of homes priced at $1 million or more are growing rapidly, according to Nashville realtor Jack Gaughan, who spoke to NPR. "It speaks to the wealth gap that we continue to see," Gaughan said.

That's the two-speed housing market NPR's reporting highlighted: cash-flush buyers trading up into luxury homes while ordinary families get boxed out by a mortgage payment that keeps growing. A housing market skewed toward high-end buyers isn't some new phenomenon invented in 2026. It's the predictable result of four years of rate hikes and a supply shortage that predates this administration and the last one.

Builders aren't stepping in to fix the supply problem either. Housing starts fell 12.4% in July compared to June and dropped 13.5% year-over-year, according to Census Bureau data cited by Real Estate News. Single-family starts hit an annualized rate of 808,000, the slowest pace since November 2022, when mortgage rates had spiked above 7%.

There's a sliver of good news buried in there. Single-family permits rose 2.5% from June and were up 1.1% year-over-year, according to Real Estate News. Builders are lining up projects even if they're not breaking ground yet. Odeta Kushi, chief economist at First American, put it bluntly: "Builders are keeping projects moving, but they're not ready to bet on them yet."

Yun offered a longer-term case for optimism, noting pending contracts currently sit 30% below their pre-pandemic 2019 level while payroll employment is 5% above it. He called that gap "pent-up demand that should be unleashed in the coming years as more supply reaches the market and affordability improves." That possibility depends entirely on mortgage rates coming down and staying down, something no one can promise right now.

Hannah Jones, senior economist at Realtor.com, raised whether this is just seasonal softness or something worse. "Inventory tends to build and price cuts become more common as attention turns toward the school year, which could create real opportunity for buyers still active in the market, particularly if rates find some relief," Jones said.

A NAR survey found few agents expect much improvement in buyer or seller activity over the next three months, according to NPR. The next data point that matters is whether mortgage rates ease off 6.69% before the fall selling season ends, or whether this housing market keeps sitting stuck in the mud for a fourth straight year.