Stuck in the mud at the bottom for a 4th year, after the 2020-2022 home-price explosion.
By Wolf Richter for WOLF STREET.
Pending sales of existing homes dropped another 2.3% in July from June, seasonally adjusted, to the second-lowest on record, a position shared with July 2024. The record low in the data occurred in January this year.
Compared to the already stuck-in-the-mud levels in July a year ago, sales dropped by 2.2%, according to data from the National Association of Realtors today, whose “pending sales” data only goes back to July 2010 (its “closed sales” data goes back to the 1980s). Sales declined in all regions, but plunged in the West to record lows and fell sharply in the South and Northeast.
Compared to July 2021, pending sales have collapsed by 36%, compared to 2020 by 41%, and compared to the Julys in 2018 and 2019 by 33%. Compared to July 2010 during the big bad Housing Bust, sales are down by 9%.
The housing market is now in the process of completing the fourth year that sales have remained mostly below the lows of the Housing Bust, stuck deeply in the mud at the bottom, after the home-price explosion from mid-2020 through mid-2022, and now amid the highest supply of existing single-family homes in 10 years.
The NAR’s metric of pending home sales tracks contracts that were signed in July but that haven’t closed yet and could still get canceled for whatever reason. The rate of cancellations has been running high.
Pending home sales are a preview of what is coming in terms of closed home sales.
Pending home sales by region.
A map of the four Census Regions is posted at the top of the comments below.
In the West, pending sales plunged by 7.7% in July from June, seasonally adjusted, to a new record low in the data.
Compared to July in prior years:
- 2025: -7.1% (year-over-year)
- 2024: -8.2%
- 2023: -11.9%
- 2022: -25.0%
- 2021: -47.4%
- 2019: -43.9%.
In the South, pending sales dropped by 2.2% month-to-month, seasonally adjusted, with only three other months being as low or lower.
Compared to July in prior years:
- 2025: -3.0% (year-over-year)
- 2024: +0.5% (second-lowest month on record).
- 2023: -9.9%
- 2022: -20.6%
- 2021: -36.2%
- 2019: -32.2%.
In the Northeast, pending sales fell by 2.0% month-to-month, seasonally adjusted.
Compared to July in prior years:
- 2025: -0.2% (year-over-year)
- 2024: -0.3%
- 2023: +2.2%
- 2022: -18.6%
- 2021: -31.2%
- 2019: -30.7%.
In the Midwest, pending sales declined by 0.7% month-to-month, after the 8.9% plunge in the prior month, seasonally adjusted.
Compared to July in prior years:
- 2025: +1.7% (year-over-year)
- 2024: +5.8%
- 2023: -4.2%
- 2022: -20.6%
- 2021: -30.4%
- 2019: -26.2%.
Mortgage rates in July were in the 6.4% to 6.7% range, according to Freddie Mac’s average weekly mortgage rate data. Mortgage rates have been in this range since September 2022.
In the decades before 2009, before the Fed’s QE and zero-interest-rate policy began to distort the markets, mortgage rates were about as high or much higher than today. These are fairly normal mortgage rates in a historical context. They’re not too high. What’s too high is inflation. The housing market – buyers, sellers, and the entire industry in between – needs to get used to those rates.
These mortgage rates are only high in the context of the QE-era when the Fed “printed” trillions of dollars to purchase trillions of dollars of Treasury securities and MBS in order to repress interest rates and mortgage rates, and thereby inflate asset prices and home prices, eventually triggering the worst consumer-price inflation in 40 years and the worst home-price explosion on record. As a result, home prices have overshot what the market can bear, have inflated homeowners’ insurance premiums and other carrying costs that sap consumer spending elsewhere, and have become a liability for the housing market and for the economy.
In case you missed it: Sales of Existing Single-Family Homes Sink Deeper into Mud, Supply Jumps to 10-Year High, Condo Supply at 14-Year High
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The four Census Regions of the US:
Realtors are hanging out at intersections now. It has gotten bad!
😆
/s
EHS/PHS – U.S. existing/used/resale housing market has reached equilibrium with buyers, price and rates. Yes, it’s frozen. Existing sellers aren’t reducing price much, so the Mexican standoff continues. Used house sales is the largest part of the market vs. new.
NHS – Builders are more pragmatic and are cutting via incentives and actual price cuts, but also reaching a price point where it’s difficult to attract buyers.
EHS/PHS: Most used house sellers aren’t feeling pressure to sell yet, since their stonk portfolios are still good, but a stonk market crash would change that pretty quick. Think AI bubble.
NHS: Builders will need to keep cutting at the expense of profit margins. New house build quality is generally poor. Also, they’re ugly with open floor plan and gray/dark color schemes. I wouldn’t buy new.
Then: Pandemic rates at 2-3% drove prices to the moon (i.e. 30-50% increases).
Now: Mortgage rates are 6.75%, but prices are only starting to adjust lower. Don’t forget all the higher carrying costs now due to the accumulated inflation.
Overall: Mean reversion will happen, but housing is an illiquid asset and takes years to return to the long-term trend. This is another way of saying that real estate – all asset classes – are cyclical. We’ll get there when we get there, but don’t hold your breath (read years). Oh, and don’t forget demographics. Boomers are aging out. HH formation is low and still declining. Who will buy?
Don’t forget the IRA(Inflation Reduction Act)of $1.3 Trillion by the Biden Administration. Go figure…
Personally I’ve received a record number of those realtor we want to sell your property type mailers at my primary home.
Just wondering what will be the final item that bursts the dam in housing besides just slow time.
Going to a fun show to see over the incoming years.