Pending home sales fell in June, meaning the housing market could cool

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A drop in sales could actually be good news for buyers.

There have been a ton of inquiries to buy a new home as mortgage rates have hovered near record highs for most of the year. But in June, pending home sales fell 1.9% from May, according to the National Association of Realtors. And that could be a sign that the housing market is finally starting to calm down.

Will buyers soon benefit from lower house prices?

Pending home sales refer to sales contracts for the purchase of a home that have been signed but not yet closed, and it is a measure of the strength of the housing market. At this point, home prices are at record highs, but that has deterred many buyers.

In May, home prices rose 17% from the previous May, according to the S&P Case-Shiller National Home Price Index. This represents the largest annual gain on record, and it could explain why pending home sales fell last month.

Of course, the low real estate inventory has also been an issue. In fact, one of the main reasons home prices have skyrocketed this year is that there haven’t been enough properties for buyers to choose from. So what happened was that buyers fought for the same limited homes, trying to outbid each other and driving up home prices.

Now, Realtor.com reports that the number of newly listed homes in June is up 5.5% from June 2020. But overall, inventory is still well below normal levels. And that makes it a very difficult market for today’s buyers to navigate.

Should you buy a house now?

Depending on the home price situation and the level of competition in the market, now is not really the best time to buy, even with such competitive mortgage rates. But if inventories slowly start to rise and buyers start to be more cautious about the price they’ll pay for a home, the situation could improve later in the year.

If you have a compelling reason to buy a home now – for example, your lease is about to expire and you don’t want to renew it for another year – then you may want to continue your house hunting. Otherwise, it might be beneficial to sit still for a while.

There is a good chance that mortgage rates will remain competitive through 2022, and possibly beyond. Or, to put it another way, if you pull out of today’s tough housing market and wait, you won’t necessarily lose the chance for a competitive interest rate on a home loan. What you can do, however, is save yourself a world of stress and avoid overpaying for a house that would normally sell for much less.

Plus, waiting for more inventory to hit the market means you’ll be less likely to settle for a home you’re not really in love with. That alone is worth the wait.

A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage

Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.

Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.