Home Purchases Collapse in Record Numbers as Buyers Get Cold Feet

American homebuyers continue waiting on the sidelines for better opportunities as sales of existing homes fell 2 percent last month, compared to a year earlier to a seasonally adjusted annual rate of 4.1 million—the lowest July level on record dating back to 2012, according to a recent Redfin report.

While existing home sales were up by a modest 0.6 percent in July compared to a month earlier, the numbers still show that buyers are reluctant to enter the market at a time when prices are still rising at the national level and mortgage rates have yet to come down significantly.

The 30-year fixed-rate mortgage is now 6.49 percent, according to data from Freddie Mac, down from 7.22 percent in early May and more than 0.5 percent lower than they were during this same time last year. Freddie Mac expects rates to continue trending down “in the coming months as inflation continues to slow.” This would be welcome news for aspiring buyers who have been waiting for rates to come down, as well as for sellers who have been holding on to their homes because of their older, better rates.

“When rates finally dropped, buyers got excited and we saw more activity. But now that rates have fallen to the mid-6 percent-range, people have been waiting to see if they’ll drop even more,” said Nicole Stewart, a Redfin real estate agent in Boise, Idaho, in a news release. “Home prices are going up, though, so it really becomes six of one, half dozen of the other,” she added.

The median sale price of a home in the U.S. was $439,170 in July, up 4.1 percent compared to a year earlier and just 0.7 percent below the all-time high of $442,389 reached in June. That is costly enough to discourage—and price out—many aspiring buyers across the country.

Pending sales were down 2.9 percent in July compared to a month earlier and 5.8 percent year-over-year. Both were the biggest drops in nearly a year, according to Redfin. Nearly 60,000 home-purchase agreements (about 15.8 percent of the total) were canceled last month—the highest percentage of any July on record dating back to 2017.

Buyers in Florida and Texas, where inventory has been growing faster than anywhere else in the country, were most likely to back out of deals. In Tampa, Florida, 1,266 home-purchase agreements were canceled in July, about 21.9 percent of all homes that went under contract in that month.

“A lot of people are also concerned about the political climate,” said Stewart. “They can afford to buy, but have been holding off because it’s unclear where the country will be in six months, though, in reality, who is in the Oval Office probably won’t have much of an impact on the housing market.”

Redfin senior economist Elijah de la Campa warned that waiting for mortgage rates to come further down could be a strategy that fires back on buyers when a lot of other people have the exact same idea.

“If you have the means to buy and have been thinking about doing so, now actually might not be a bad time,” he said in a news release. “That’s because mortgage rates have fallen enough to boost your purchasing power, but not enough to bring tons of buyers off of the sidelines and drive up competition.”

Buyers are already getting more options, in part because the U.S. has been building more homes than in previous years, and in part because of the number of homes on the market that are remaining unsold.

The supply of homes at the national level jumped by a record 13.7 percent in July, though it was 0.6 percent lower than a month earlier. New listings were up 2.9 percent year-over-year but unchanged month-over-month.