The consensus read on the US housing market holds that lower mortgage rates will eventually unlock frozen sales. The pending home sales collapse playing out in the August data makes that thesis look increasingly threadbare, and the affordability numbers underneath the headline undercut the popular narrative further still.
Pending sales of existing homes edged up in August from a July figure that was itself revised down to the second-lowest reading in data going back to 2010, just above the all-time low set in January. The net effect: August merely recovered to the level of what July was originally reported as. That is the range in which sales have been pinned. Compared to August last year, pending sales fell 4.7% on a seasonally adjusted basis and 4.9% unadjusted, according to the National Association of Realtors.
The longer comparisons are harder to wave away. Against August 2021, pending sales have collapsed by 39%. Against August 2020, by 45%. Against the Augusts of 2019 and 2018, by 33% and 32% respectively. Even measured against August 2010, during the Housing Bust, sales are down 13%.
What the Pending Home Sales Collapse Tells You About the Affordability Story
The standard comfort blanket is affordability: rates came down from their 2023 peaks, so relief is arriving. The data is less reassuring. The contracts captured in August pending sales were signed when 30-year fixed mortgage rates sat in the 6.5% to 6.7% range, per Freddie Mac data, and in the 6.7% to 6.8% range per Mortgage News Daily data. Those were the lower rates. Since then, the Freddie Mac weekly average has climbed back to 6.95%, while Mortgage News Daily’s daily measure has been above 7% for several days and sits at 7.19%.
So the August contracts were signed into a comparatively benign rate environment, and sales still came in near record lows. The NAR’s Housing Affordability Index registered at 104.7, up from 101.2 a year ago, a number the bulls will cite. But an index reading above 100 simply means a median-income household can technically qualify for a median-priced home. It says nothing about whether buyers judge that home worth buying at today’s prices, nor does it capture cancellation rates, which have been running high.
Wolf Richter, writing for Wolf Street, frames the underlying driver plainly: what is too high is not mortgage rates in a historical sense, but home prices after the explosion from mid-2020 to mid-2022, an explosion that has inflated insurance premiums, property taxes and other carrying costs. Mortgage rates have been in the 6% to 8% range since September 2022, a band that is, Richter notes, in the lower portion of the range that prevailed in the decades before 2009. The distortion was the decade of near-zero rates, not today’s levels.
Supply Rising, Prices Sticky, Buyers Unmoved
The regional picture offers no obvious bright spot. In the West, pending sales rose 3.3% month-on-month after plunging in July to a record low, but remain down 6.7% year-on-year and are sitting at the second-lowest volume in the data. The South saw a 2.3% monthly rise to the second-lowest on record. The Midwest and Northeast both declined on the month, falling 1.6% and 4.2% respectively, with the Northeast down 3.9% year-on-year.
Meanwhile, the supply side is moving in the opposite direction. The collapse in transactions has pushed the inventory of existing homes to its highest level in over ten years, per NAR data. That supply build is visible in the price and time-on-market figures. According to Realtor.com Research, the national median list price held at $429,990 in August, unchanged year-on-year but down 2.2% month-on-month, with softer trends concentrated in the South and West. Homes are now sitting on the market for an average of 60 days, seven days longer than a year ago, and above pre-pandemic norms for the second consecutive month.
That combination (supply at decade-plus highs, prices barely moving, time on market extending) is not what a market healing from an affordability shock looks like. It is what a market looks like when buyers have decided the price is wrong and sellers have not yet fully accepted it. September will mark four years of sales volume running mostly below the lows of the prior Housing Bust. The pending sales data suggests year five is not going to open differently.
