Despite high demand, a decreasing number of people are buying homes as they adopt a 'wait and see' approach.

Despite a decrease in mortgage rates, the number of pending home sales reached a record low last month, according to a report by the National Association of Realtors.

The number of pending home sales decreased by 5.5% in July and 8.5% compared to the previous year, reaching a record low since the index was introduced in 2001, according to the National Association of Realtors' Pending Home Sales Index.

The home buying market has been affected by timing issues, with spring and summer traditionally being peak seasons. However, due to limited supply and high prices, many potential buyers have been unable to enter the market.

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Although median mortgage rates have decreased slightly, they remain above 6%, significantly higher than the 3% rates seen in 2021.

Homeowners are hesitant to sell their homes due to the "lock-in effect," which results from nearly 9 out of 10 homeowners having mortgage rates lower than 6%. This has limited the supply of housing.

Homebuyers are in 'wait and see' mode

Many buyers who can afford a home are likely waiting for mortgage rates to decline further later this year, as is widely expected.

The Federal Reserve's indication of a potential cut to its benchmark interest rate is due to slowing inflation and an uncertain economic outlook, which are driving these expectations.

NAR's report suggests that buyers may be in "wait-and-see" mode until home affordability improves and there is more certainty about housing policy following the U.S. presidential election in November.

The NAR report suggests that an increase in mortgage rates could lead to a decrease in home prices, as fewer buyers would enter the market due to higher costs.

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