The summer increase in mortgage rates wiped away more of the purchase market’s fragile spring momentum in July, pushing pending home sales
to their lowest level since January.
The National Association of Realtors’ Pending Home Sales Index declined 2.3% from June to 71.2 and fell 2.2% from July 2025, according to the
association’s latest report. Contract signings declined month over month in all four regions, suggesting the pullback was not confined to a handful
of expensive or supply-constrained markets.
“The highest mortgage rates of the year hit right in the middle of summer, and that’s pulling back contract signings,” NAR Chief Economist
Lawrence Yun said. “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, though there are large local market variations.”
The average 30-year fixed mortgage rate reached 6.66% during the final week of July, up from 6.49% at the end of June, according to Freddie
Mac. NAR calculated that the rate averaged 6.54% for the month.
The resulting decline reinforces a pattern that has become increasingly clear in 2026: Purchase demand returns when rates provide even modest
relief, but that demand remains vulnerable to another increase in borrowing costs.
Earlier this spring, pending sales reached their highest level in nearly four years after mortgage rates briefly declined. By late July, however, higher
rates were once again thinning purchase pipelines, even while price reductions and longer marketing times gave remaining buyers more
negotiating power.
Employment Growth Has Not Become Housing Demand. The deeper concern in NAR’s report is the widening disconnect between the labor
market and homebuying activity.
Pending contracts are now 30% below their 2019 level, while payroll employment is 5% higher, according to Yun. That means a substantially
larger workforce is producing considerably fewer home-purchase contracts than it did before the pandemic.
Yun characterized that disparity as evidence of “sizable pent-up demand” that could emerge in future years if mortgage rates stabilize or decline,
housing supply expands, and affordability improves.
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