NEW YORK — U.S. pending home sales dropped 5.4 percent in June from May, seasonally adjusted, reaching the lowest level for any June since records began in mid-2010, the National Association of Realtors said.
The June figure is down 0.3 percent from the already depressed levels of June last year. The slide extends further back: sales are down 36 percent from June 2021, 37 percent from June 2020, 34 percent from June 2019 and 32 percent from June 2018. Even measured against June 2011, during the housing bust, sales are down 20 percent.
This demand collapse is unfolding as supply of existing single-family homes reaches a 10-year high and existing condos hit a 14-year high. Rising inventory against paralyzed buyer activity sets up continued downward pressure on prices.
Sales fell across all four U.S. regions. The Midwest led the drop, falling 8.9 percent from May and more than reversing the prior month's gain, pushing the region back into its low range. The West dropped 4.7 percent, hitting a record low shared with October 2023. The South fell 4.1 percent to the lowest June on record and the sixth-lowest monthly reading in the data's history. The Northeast declined 3.0 percent, the smallest regional drop.
Pending home sales track contracts signed but not yet closed. Elevated cancellation rates are a compounding factor, driven by buyers encountering homeowner's insurance difficulties or an inability to sell their existing property.
Mortgage rates averaged 6.48 percent in June. In the most recent reporting week, rates climbed to 6.55 percent, according to Freddie Mac. Rates have held in this range since September 2022, grinding affordability lower with each passing month.
From the bond market's perspective, these rates are not high relative to decades prior to 2009. They are, however, elevated against the quantitative easing era, when the Federal Reserve actively purchased Treasuries and mortgage-backed securities, suppressing mortgage rates for an extended period. That policy helped fuel the worst inflation in 40 years and the largest home-price surge on record, leaving current prices at levels that now weigh on broader economic stability.
The bond market is recalibrating for a world where the Fed is no longer suppressing long-term rates. Higher fixed-income yields raise duration risk for mortgage-backed securities, compressing spreads and challenging origination volumes. Rates sustained above 6 percent reflect the market's expectation that the current rate environment persists, forcing a re-evaluation of housing valuations.
For institutional money managers, the housing data sharpens the Fed's dilemma: its inflation mandate is pulling against the rate sensitivity of the entire housing sector. Sticky mortgage rates signal broader bond market pricing for a higher terminal policy rate than previously anticipated, even as housing data points to cooling demand.
