Home sales remain positive year over year, but higher mortgage rates are beginning to slow demand, according to the latest pending‑sale tracker released this weekend.
Pending‑sale data show modest growth amid rate pressure
The pending home‑sale index, which reflects contracts signed 30‑60 days before closing, posted a slight year‑over‑year increase last week after a marginal decline two weeks earlier. While the data still points to growth, the pace has noticeably cooled.
Mortgage rates peaked at a yearly high last week, hovering just below the 7% threshold that historically triggers a sharper slowdown in buyer activity. Rates have not yet breached seven percent this year, but analysts warn that sustained higher rates could erode the modest gains seen in recent weeks.
Purchase‑application figures echo the same trend. After a typical post‑holiday dip, applications rose six percent week‑to‑week, yet the year‑over‑year growth was only 0.2%, reinforcing the view that market momentum is weakening.
Inventory and new listings indicate a tightening market
Housing inventory has slowed considerably since mid‑June 2025, with most weeks in the past two months showing slight negative year‑over‑year changes.
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Despite these shifts, the overall housing discussion would look different without the improvement in mortgage spreads. Historically, spreads have ranged from 1.60% to 1.80%; last week they slipped to 1.94% from 1.97% the week before, keeping average mortgage rates below the 6.64% level for most of the year.
For perspective, if last year’s worst‑case spread levels had persisted, rates would be near 7.98% today instead of the current 6.81% figure. The same calculation for 2024 and 2025 would place rates at roughly 7.60% and 7.41%, respectively.
Market participants will watch the Federal Reserve’s upcoming meeting and the latest inflation report for clues on future rate moves. Even if the Fed were to raise rates, much of that expectation is already priced into bond markets, meaning immediate impacts on home‑sale activity may be muted.
The slowdown in home‑sale growth mirrors a pattern that emerges whenever mortgage rates climb above 6.64% and edge toward the seven percent mark. The current environment suggests that while demand remains positive, the cushion provided by lower spreads is narrowing, and further rate increases could tip the balance toward a more pronounced deceleration.
