US Pending Home Sales Plunge 5.4% as Mortgage Rates Bite

Pending home sales in the U.S. fell 5.4% in June, far worse than the 0.5% decline economists had expected. The National Association of Realtors' index, which tracks signed contracts on existing homes, dropped to 74.3 from 78.5 in May. All four U.S. regions posted declines.

The data arrived alongside a separate gauge of builder confidence that also missed. The NAHB/Wells Fargo Housing Market Index slipped to 34 in July from a revised 36 in June, below the 35 consensus. It was the 15th straight month the index has held below 40, a stretch not seen since 2012.

Builders are leaning harder on price cuts and incentives to move inventory. Thirty-seven percent of builders cut prices in July, up from 35% in June, with the average discount holding at 6%. Sixty-three percent offered some form of sales incentive, the 16th consecutive month that share has exceeded 60%.

“Affordability remains the home building industry’s primary challenge,” NAHB Chairman Carl Harris said in a statement. He cited elevated mortgage rates, costly land, rising material prices, and persistent skilled labor shortages. Harris called a recently enacted housing law “a positive step” but said more policy change is needed at the state and local level.

The pending sales index is a leading indicator for existing-home closings, typically forecasting activity one to two months ahead. The June reading suggests closed sales in July and August will remain under pressure. Mortgage rates have stayed above 6.8% for much of the summer, pinching buyer budgets and keeping many sidelined.

The combination of weak pending sales and fading builder confidence points to a housing market that is grinding through its slowest stretch in over a decade. The next test comes with the Federal Reserve's July rate decision, where policymakers are expected to hold rates steady but may signal a cut later this year.