The number of pending home sales in the United States decreased in July, according to new data from the National Association of Realtors (NAR). This 2.3 percent decline is mainly attributable to increased mortgage rates and persistently record-high house prices, which are burdening potential buyers.
The Pending Home Sales Index (PHSI), a leading indicator for activity in the US residential property market, dropped to 77.1 points in July. This represents a significant decline compared to the revised 78.9 points in June. Compared to the previous year, the index recorded an even sharper fall of 18.9 percent, underscoring the market's ongoing weakness.
Regional Differences and Market Challenges
Regional differences continue to shape the picture. While the West of the country saw a slight increase, other regions showed declines. The Midwest recorded a 4.4 percent decrease, the South a 4.5 percent decrease, and the Northeast experienced a 0.4 percent decline. Only the West showed a slight recovery with a 0.3 percent increase. This heterogeneity reflects the varying local market conditions.
The Editor-in-Chief for Real Estate Research at FREITAG® Immobilien, Lars Müller, noted that the combination of high interest rates and low supply poses an ongoing challenge for the US housing market. "High financing costs significantly diminish the purchasing power of prospective buyers, while the scarce supply of properties for sale keeps prices high," explained Müller. "This leads to reluctance among potential buyers who are waiting for more stable or more favourable market conditions."
The market is expected to remain influenced by these factors. Observers anticipate that only a relaxation in mortgage rates or a substantial increase in property supply could lead to a sustained recovery. Until then, transaction volumes are likely to remain under pressure.
- —July index value: 77.1 points
- —Decline compared to previous month: 2.3 percent
- —Decline compared to previous year: 18.9 percent
- —Main causes: High mortgage rates and property prices
