Mortgage Rates Increase Pressure Housing Demand
Pending home sales across the U.S. declined in July as elevated mortgage rates and record-high home prices continued to weigh on prospective buyers, according to new data from the National Association of Realtors.
The NAR Pending Home Sales Index fell 2.3% from June and was down 2.2% from July 2025, marking the lowest level of pending sales since January 2026. The monthly decline was broad-based, with all four major U.S. regions recording fewer contracts.
“The highest mortgage rates of the year hit right in the middle of summer, and that’s pulling back contract signings,” said NAR Chief Economist Lawrence Yun. “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 regional data showed the sharpest monthly contraction in the West, where pending sales fell 4.7%. The South declined 2.2%, the Northeast dropped 2.0% and the Midwest posted a comparatively modest 0.7% decrease.
The annual picture was more divided. The Midwest was the only region to record year-over-year growth, with pending sales increasing 1.7%. The Northeast slipped 0.2%, the South fell 3.0% and the West registered the largest annual decline at 7.1%.
Yun said the labor market could provide an eventual source of support for housing demand, particularly if mortgage rates stabilize or move lower. But he cautioned that stronger employment conditions do not immediately translate into higher home sales.
“Job gains should bring more buyers into the market, especially if mortgage rates stabilize or decline, though that impact takes time to show up,” Yun said. “Right now, pending contracts are 30% below their pre-pandemic 2019 level, while payroll employment is 5% above. That gap points to sizable pent-up demand that should be unleashed in the coming years as more supply reaches the market and affordability improves.”
The national slowdown also masks significant differences among major metropolitan markets.
Among the 50 largest U.S. metropolitan areas, Virginia Beach-Chesapeake-Norfolk posted the strongest year-over-year increase in pending sales, rising 17.2%. San Antonio-New Braunfels followed with an 11.8% gain, while Cincinnati increased 6.2%.
Pittsburgh ranked fourth with a 3.7% increase, followed by Miami-Fort Lauderdale-West Palm Beach at 2.4%. Austin-Round Rock-San Marcos rose 1.6%, Buffalo-Cheektowaga gained 1.3%, St. Louis increased 1.2%, Jacksonville rose 1.2% and Columbus edged up 0.2%.
The Pending Home Sales Index is considered a leading indicator for the existing-home market because a signed contract generally precedes the closing of a transaction by one to two months. July’s decline therefore points to continued softness in existing-home closings later this summer and into the early fall.
The latest figures illustrate the central challenge facing the housing market: employment remains supportive of household demand, but high borrowing costs and elevated home prices continue to constrain the ability and willingness of many buyers to enter the market.
At the same time, the sizable gap between today’s contract activity and pre-pandemic levels suggests that a meaningful pool of potential buyers remains on the sidelines. Whether that demand returns will depend heavily on mortgage rates, housing inventory and the broader improvement in affordability.
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