Housing Market Cools: Pending Sales Dip and Cancellations Surge in July
Washington D.C. – August 28,2024 - The U.S. housing market showed further signs of cooling in July, as pending home sales declined and contract cancellations reached levels not seen since 2017, according to data released today. the slowdown underscores ongoing affordability challenges and buyer hesitancy amidst economic uncertainty.
The National Association of Realtors (NAR) reported a 0.4% decrease in its monthly pending home sales index for July, compared to June.while sales remained 0.7% above levels seen in July 2023, the month-over-month dip signals a weakening trend.
A key factor contributing to the slowdown appears to be fluctuating mortgage rates. July saw rates creep upwards, starting at 6.67% for a 30-year fixed mortgage, peaking at 6.85% mid-month, and settling at 6.75% by month’s end (data via Mortgage News Daily). Fortunately, rates have since eased, currently sitting at 6.51% in August, but the July volatility likely impacted buyer confidence.
“even with modest improvements in mortgage rates, housing affordability, and inventory, buyers still remain hesitant,” explained Lawrence Yun, NAR’s chief economist.”Buying a home is often the most expensive purchase people will make in their lives. This means that going under contract is not a decision homebuyers make quickly.”
Cancellations Spike, Reflecting Buyer Uncertainty
Beyond declining sales, a concerning trend emerged: a notable increase in contract cancellations. Real estate brokerage Redfin reported that 15% of pending sales were canceled in July – the highest rate recorded as the company began tracking this metric in 2017.
The areas experiencing the highest cancellation rates were concentrated in the Sun Belt, with San Antonio (22.7%), Fort Lauderdale (21.3%), and tampa (19.5%) leading the way. Redfin agents attributed the cancellations primarily to buyers experiencing “cold feet,” a sentiment likely tied to broader economic anxieties.
Further reinforcing this picture, a recent NAR survey revealed that only 16% of Realtors anticipate an increase in buyer traffic over the next three months.
Regional Variations and a ‘Cruel summer’ for the Market
The July slowdown wasn’t uniform across the country. Sales declined month-over-month in the Northeast and Midwest, remained flat in the South, and saw a modest increase in the West.
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