Housing Market Sees Surge of ‘Wait-and-See’ Home Buyers

Last month, contract signings fell to their lowest level on record as the housing market continued to struggle through a sluggish summer. According to the National Association of REALTORS®’ latest Pending Home Sales Index—a forward-looking measure based on contract signings—there was a 5.5% decline in July and an 8.5% drop compared to the previous year.

Lawrence Yun, NAR’s chief economist, commented, “A sales rebound did not materialize in midsummer. Despite job growth and increased inventory, these factors were insufficient to overcome affordability issues and some degree of hesitation related to the upcoming U.S. presidential election.”

Some potential home buyers might also be holding out for a decrease in mortgage rates. Federal Reserve Chair Jerome Powell recently indicated that “the time has come for policy to adjust,” suggesting a likely interest rate cut at the Fed’s mid-September meeting. Although the Fed’s rate does not directly set mortgage rates, it can influence them, though the extent is debatable among economists.

Home buyers might choose to wait until fall to see if any potential rate cuts could enhance housing affordability. Nirvan Ghosh, portfolio manager at The Palisades Group, predicts that the Fed could implement at least four rate cuts by the end of the year, which might lower mortgage rates from their current mid-6% averages. Additionally, buyers could have more options as inventory levels increased by 20% in July compared to a year ago, according to NAR.

Ghosh notes, “We expect that any decrease in mortgage rates will continue to put upward pressure on housing prices due to pent-up demand from prospective buyers, likely outweighing any increase in supply.”