The National Association of Realtors' Pending Home Sales Index dropped to 71.2 in July 2026, the lowest reading since January and the second consecutive monthly decline. The 2.3 percent month-over-month decrease extended a slide that included a 4.8 percent decline in June and a 5.4 percent drop in May—three straight months of contraction.
The year-over-year comparison is equally weak. July's index sat 2.2 percent below the same month in 2025. More striking is the longer-term gap: NAR Chief Economist Lawrence Yun said pending contracts are now 30 percent below their pre-pandemic 2019 level, even as U.S. payroll employment stands 5 percent above that same baseline.
"The highest mortgage rates of the year hit right in the middle of summer, and that's pulling back contract signings," Yun said. The timing mattered. Mortgage rates reaching their 2026 peak during the traditional home-buying season compressed exactly the window when transaction volume normally surges. Instead, all four major U.S. regions posted monthly declines, led by the West.
Record home prices compounded the rate problem. Yun said houses for sale are sitting on the market longer and fewer buyers are bidding above the asking price than a year ago, though he acknowledged large local market variations. The combination of elevated financing costs and peak prices created an affordability ceiling that kept buyers on the sideline even in peak season.
The Pending Home Sales Index functions as a leading indicator for the broader housing market. Because a home goes under contract one to two months before it is sold, the index typically leads Existing-Home Sales by a similar lag. July's reading of 71.2 therefore flags pressure on closed transaction counts heading into September and October.
NAR measures signed real estate contracts on existing single-family homes, condos and co-ops. A contract signing captures buyer commitment at a specific financing cost—so when mortgage rates spike, the signed-contract count drops almost immediately, faster than any other widely tracked housing metric.
Yun's counterargument to the bearish read centers on employment. "Job gains should bring more buyers into the market, especially if mortgage rates stabilize or decline, though that impact takes time to show up," he said. The 5-percentage-point employment premium over 2019 levels represents genuine purchasing power that has not yet translated into transactions—a demand pool that remains latent rather than destroyed.
The structural case for that latent demand rests on the 30-percent contract deficit versus 2019. If employment is the primary driver of household formation and eventual home purchases, the gap between where contracts are and where the labor market says they should be is unusually wide. Yun described it as "sizable pent-up demand that should be unleashed in the coming years as more supply reaches the market and affordability improves."
The counterargument to Yun's optimism is timing. Rate sensitivity in the current cycle has proven faster and sharper than historical norms suggested. Three consecutive months of declining pending sales—May down 5.4 percent, June down 4.8 percent, July down 2.3 percent—trace directly to the rate path. If rates stay elevated through the fall selling season, the employment argument defers but does not disappear.
Supply is the other variable. Record-high asking prices reflect a market where inventory, while better than 2022 lows, has not normalized. Longer days on market and fewer above-asking bids suggest sellers are adjusting expectations gradually, not abruptly. That slow price discovery extends the affordability standoff rather than resolving it quickly.
NAR will release the August 2026 Pending Home Sales data on Thursday, Sept. 10, 2026, at 10 a.m. Eastern. That release will show whether the July rate peak translated into a sustained cooling or whether any subsequent rate movement in August changed contract activity—the next hard data point that tests Yun's stabilization thesis.
