Rising prices and mortgage rates are keeping buyers out of the housing market, resulting in July recording the fewest residential property sales in nearly two years, a new industry report found.
Home sales fell 4.1% month over month and 0.6% on an annual basis in July, according to Redfin. Pending home sales, a real-time indicator of homebuying demand, also dropped 2.5% to their lowest level since December.
Mortgage applications fell in three of the four weeks in July as well, the Mortgage Bankers Association noted. However, in the first week in August, the MBA reported a 3.6% rise in applications on a seasonally adjusted basis. Purchase volume was up 3% week-over-week.
"The housing market suffered from a mid-summer slump in July as would-be buyers grappled with record-high home prices, increasing mortgage rates and growing financial insecurity," said Chen Zhao, Redfin's head of economics research, in a press release Wednesday. "Many Americans simply can't afford today's housing costs, while others are holding off because they're worried about the economy and/or their job security."
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"The silver lining is that the buyers who can afford a home may be able to negotiate on price and get concessions from sellers who are eager to offload their house," Zhao said.
Little competition gave active buyers power over sellers. Roughly 14% of home-sale agreements were cancelled as a result, the highest share since 2023. Buyers may have backed out of a contract during the inspection period if they saw a home they like better, an issue came up that they don't want to deal with or if they just got cold feet, according to Redfin.
On the other hand, market conditions caused sellers to pull back as well. New listings sank to their lowest level since October 2024 last month, decreasing 0.6% year over year and 0.1% on a monthly basis. High mortgage rates discouraged some homeowners from listing, especially those who would have to give up a lower rate to move. Other potential sellers held off because of the slow demand, the release said.
The total number of homes for sale ticked down 0.3% month over month. Little demand means homes take longer to sell, preventing the total from dropping significantly, according to the release.
Where has demand slumped the most?
Demand again varied on a regional basis. Home sales plummeted in Texas, as San Antonio saw a 12.6% decline, followed by Dallas at 10% and Fort Worth at 9.9%. Seattle saw the largest decrease in pending home sales at 15.6%, right in front of Houston at 14.3%, the report found.
Texas' housing market slowed partly because buyers have a lot of options after years of homebuilding,while Seattle grappled with high home prices and layoffs in the tech job market.
"Seattle is a tech-driven market, and right now a lot of buyers are feeling cautious about layoffs, AI and job security," said Chase Costello, a Redfin Premier agent in the Seattle area, in the release. "Tech workers aren't moving between companies, or moving into the area, as much as they used to, and that means fewer people are trading up into new homes."
Demand was particularly strong in some places. Home sales rose fastest in West Palm Beach, Florida, where they jumped 17.1% year over year. San Francisco and Milwaukee posted notable gains as well at 8.5% and 7%, respectively.
The South Florida and Bay Area markets were driven by wealthy buyers unfazed by high costs, while homes in Milwaukee remain relatively affordable, supporting demand, the release said.
