Two housing market reports released Thursday revealed persistent affordability challenges affecting both home purchases and construction activity. Pending home sales, which track signed contracts on existing properties, declined 5.4% from May and fell 0.3% compared to the same month the previous year, falling short of analyst expectations. The National Association of Realtors attributed the weakness to a combination of elevated mortgage rates and record-high median home prices, conditions that are particularly burdensome for first-time buyers. Mortgage rates on 30-year fixed loans remained elevated throughout June, holding steady at 6.6% for the month after reaching as low as 5.99% earlier in the year.
Builder sentiment deteriorated further, with the National Association of Home Builders’ index dropping to 34 in July from 36 in June. This marked the 15th consecutive month of readings below 40, representing the longest negative sentiment streak since 2012. Construction industry leaders cited multiple interconnected pressures including high mortgage rates, expensive land acquisition costs, rising material prices, and difficulties recruiting skilled workers. In response to constrained affordability, an increasing share of builders—37% in July—reduced prices, while 63% offered sales incentives to attract buyers.
Despite some builders’ pricing adjustments, the existing home market continued to experience upward price pressure due to limited housing inventory. The median home price for existing homes reached a new record in June. An NAHB economist noted that recently enacted congressional housing legislation aimed at streamlining permitting processes represents a positive development but emphasized that additional policy reforms at state and local levels remain necessary to meaningfully expand housing supply and reduce overall costs.
Originally reported by CNBC. Read the full story →