Buyers appear to be chipping away at the sellers market that has been in place since the start of the pandemic. It’s true that there is still a shortage of available homes on the market, but now there seems to be a shortage of willing buyers.
In a new report, real estate brokerage firm Redfin uncovered some telling data. First, it found that sales of existing homes – data that differs from the National Association of Realtors – fell 2% year over year in July to a seasonally adjusted annual rate of 4.1 million.
Pending home sales were down 3% from June and 6% year over year—both of which were the biggest drops in nearly a year.
Of course, that could be attributable to the lack of available homes. Maybe there are people hoping to buy a home but they can’t find one.
Perhaps. But consider this: Nearly 60,000 home-purchase agreements were canceled by buyers before they could go to closing. According to Redfin, that’s equal to 16% of homes that went under contract—the highest percentage of any July on record.
That suggests that many buyers may have begun to second-guess their purchase decision. Maybe they decided the price was too high or the mortgage rate, which has been declining in recent weeks, made the monthly payment unaffordable.
Home prices are still high
For whatever reason, the sale didn’t happen. And that means there are still more available homes on the market, which could begin to put some pressure on prices.
The Redfin report said home prices were just 0.7% below their record high in July, and that may have been one reason buyers stayed on the sidelines despite a dip in mortgage rates.
As a result, the supply of homes for sale rose a record 14% in July. That’s partly because listings are getting stale and piling up, but it means buyers have more options and room to negotiate.
Nicole Stewart, a Redfin real estate agent in Boise, Idaho, says there’s another possible explanation.
“When rates finally dropped, buyers got excited and we saw more activity,” Stewart said. “But now that rates have fallen to the mid-6%-range, people have been waiting to see if they’ll drop even more.”
The average interest rate on a 30-year mortgage is now 6.49%, down from a peak of 7.22% in early May. The Federal Reserve is expected to start cutting interest rates in September and continue through 2025, which could eventually push rates down even more.