High rates and record prices squeeze summer housing market
June pending sales fell and builder sentiment weakened as mortgage rates, land costs and low supply kept pressure on buyers and builders.
By Sal Moretti · Money Reporter
3 min read
The summer housing market is getting hit from both sides: buyers are backing away from pricey homes, and builders are souring on the cost of putting new ones up.
Two reports released Thursday showed fresh strain across the market. The National Association of Realtors said pending sales of existing homes fell 5.4% in June from May. The National Association of Home Builders said confidence among single-family builders slipped in July to its weakest level in almost a year.
Pending sales track contracts that have been signed but not yet closed, making the figure one of the quicker reads on buyer demand. The NAR said June contracts were also 0.3% below the same month in 2025 and came in far short of what analysts had expected.
NAR Chief Economist Lawrence Yun said in the trade group’s release that mortgage rates near their highest point in almost a year, paired with a record national median home price, are weighing on the market and making conditions tougher for first-time buyers.
Mortgage rates are doing no favors
Borrowing costs stayed elevated through June. Mortgage News Daily said the average rate on the 30-year fixed mortgage began the month at 6.6% and finished at that same level after moving within a tight range. The rate had been down to 5.99% at the end of February, according to Mortgage News Daily.
The pressure has shown up in loan demand. Applications for mortgages to buy homes were 2% lower last week than during the same week a year earlier, even though rates were slightly higher at that time last year.
The average 30-year fixed mortgage rate cited in the market read was 6.64%, keeping affordability front and center for shoppers already facing high home prices.
Builders are feeling it too
The NAHB’s builder sentiment index fell to 34 in July from an upwardly revised 36 in June. Any reading below 50 is considered negative. The index has now sat below 40 for 15 straight months, the longest run under that mark since 2012, according to the home builders’ group.
Robert Dietz, the NAHB’s chief economist, said in the group’s release that affordability remains the industry’s main obstacle. He pointed to elevated mortgage rates, expensive land, higher material prices and ongoing shortages of skilled labor as factors hitting the market.
More builders are reaching for discounts to get deals done. The NAHB said 37% of builders cut prices in July, up from 35% in June and 32% in May. Sales incentives were used by 63% of builders in July, slightly above June’s 62% and the 16th month in a row at 60% or higher.
Dietz also said newly enacted federal housing legislation aimed at reducing red tape and speeding local permitting could help increase supply and lower overall housing costs, while adding that more policy changes are needed at the state and local level.
Existing-home prices are still climbing. The NAR said the median price reached a new record in June, with limited housing supply continuing to push prices higher despite some weaker local markets.
Peter Boockvar, chief investment officer of OnePoint BFG Wealth, wrote that housing remains a weak spot for the U.S. economy. Citing the NAHB, he said housing accounts for about 15% to 18% of the economy overall.
This story draws on original reporting from CNBC.