Pending home sales in the United States fell sharply in June, dropping 5.4% from May, according to the National Association of Realtors (NAR) [1]. This measure, which tracks signed contracts on existing homes, was also down 0.3% compared to June 2025 and came in well below analysts' expectations [1]. The decline is attributed to the highest mortgage rates in nearly a year and record-high national median home prices, factors that are making the housing market particularly challenging for first-time buyers, according to NAR Chief Economist Lawrence Yun [1].
Mortgage rates in June remained elevated, with the average 30-year fixed rate starting and ending the month at 6.6%, significantly higher than the 5.99% seen at the end of February before the Iran war began [1]. This has contributed to weakening mortgage demand, as applications for home purchase loans were 2% lower last week compared to the same week a year earlier, despite slightly higher rates last year [1].
Builder sentiment has also deteriorated, with the National Association of Home Builders (NAHB) reporting a drop in its single-family builder sentiment index to 34 in July from 36 in June, marking the 15th consecutive month below 40—the longest such stretch since 2012. Anything below 50 is considered negative sentiment [1]. NAHB Chief Economist Robert Dietz cited affordability as the primary challenge, with elevated mortgage rates, costly land, rising material prices, and persistent skilled labor shortages all impacting the market [1].
In response to market conditions, a growing share of builders are cutting prices—37% in July, up from 35% in June and 32% in May. The use of sales incentives also increased to 63% in July, the 16th consecutive month above 60% [1]. Dietz noted that newly enacted housing legislation from Congress, aimed at reducing red tape and expediting permitting, is a positive step toward expanding supply and lowering costs, though more policy changes are needed at state and local levels [1].
Despite these challenges, prices for existing homes continue to rise, with the median price hitting a new record in June due to low supply, even as some local markets show weakness [1]. Peter Boockvar, chief investment officer of OnePointBFG Wealth, emphasized that housing remains a drag on the US economy, accounting for about 15-18% of total economic activity according to the NAHB [1].
CONCLUSION
The US housing market is under significant pressure from high mortgage rates and record prices, leading to a notable drop in pending home sales and builder sentiment. While new federal legislation may help expand supply, affordability and supply constraints continue to weigh heavily on the market, with housing remaining a key drag on the broader economy.