Pending Home Sales Fall, But Pent-Up Buyer Demand Could Shape the Next Housing Market

What's really happening with the housing market right now?

That's a harder question to answer than it might seem.

One month, home prices are making headlines. The next month, it's mortgage rates. Then inventory rises, existing-home sales change, or new economic data suggests buyers may be preparing to return to the market.

One of the better indicators for understanding where home sales could be headed next is pending home sales.

The National Association of REALTORS® Pending Home Sales Index tracks contracts signed to purchase existing homes. Because most real estate transactions close several weeks after the buyer and seller sign a contract, pending sales can provide an early look at future closed-home sales activity.

The latest numbers show that the housing market remains relatively slow.

Pending home sales declined 2.3% in July compared with the previous month and were 2.2% lower than one year earlier.

But there's another number in the report that may be even more important for anyone thinking about buying or selling a home.

Pending home sales remain approximately 30% below their pre-pandemic 2019 level, even though payroll employment is now about 5% higher.

That gap suggests something important:

There may be a significant number of potential homebuyers who have the employment and income to consider buying but haven't yet entered—or returned to—the housing market.

The National Association of REALTORS® describes that as pent-up housing demand.

If mortgage rates improve, housing inventory continues to increase and affordability gets better, some of those buyers could eventually return.

For anyone considering buying a home in New Jersey, Pennsylvania, Delaware or Florida, understanding that potential shift is important because today's slower market may not remain this way forever.

What Are Pending Home Sales?

Before looking at what the latest numbers could mean, it's helpful to understand exactly what the Pending Home Sales Index measures.

A closed home sale tells us what already happened.

A pending home sale tells us what may happen next.

When a buyer makes an offer on a home and the seller accepts it, the property typically goes under contract. The transaction doesn't usually close immediately.

The buyer may still need to complete inspections, finalize mortgage financing, obtain an appraisal, secure homeowners insurance and complete other steps before settlement.

That process can take several weeks.

Because the Pending Home Sales Index measures signed contracts rather than completed closings, economists often use it as a leading indicator of future existing-home sales.

If pending sales increase, closed sales may increase in subsequent months.

If pending sales decline, future closings may also soften.

It's not a perfect predictor because some contracts don't make it to closing, but it provides a useful look at current buyer activity.

Pending Home Sales Fell 2.3% in July

The latest report showed pending sales declining 2.3% from the previous month.

They were also 2.2% lower than during the same period one year earlier.

At first glance, that might sound like straightforward bad news for housing.

But housing data needs context.

Buyers have spent the past several years dealing with a difficult combination of higher home prices and mortgage rates that are well above the unusually low levels available earlier in the decade.

Homeowners insurance has become more expensive in many areas.

Property taxes can significantly affect affordability.

And although housing inventory has improved in some markets, buyers still face limited choices in others.

Against that backdrop, it's not surprising that transaction volume remains below historical levels.

What's more interesting is the potential demand sitting on the sidelines.

Pending Sales Are Still 30% Below 2019 Levels

The comparison with 2019 is striking.

According to NAR, pending contracts are approximately 30% below their pre-pandemic 2019 level.

Yet payroll employment is approximately 5% higher.

Normally, employment growth is supportive of housing demand.

People with jobs have income.

Income is one of the fundamental requirements for qualifying for a mortgage.

Employment growth can also lead to household formation, relocation and other life changes that create housing demand.

But home sales haven't kept pace with employment.

That suggests the issue isn't necessarily a lack of people who want to own homes.

Instead, many potential buyers may be waiting because the financial equation hasn't worked for them yet.

What Does "Pent-Up Demand" Mean in Housing?

Pent-up demand is essentially demand that exists but hasn't yet translated into purchases.

Think about someone who wants to buy a home but decides not to because the monthly payment is currently higher than they're comfortable paying.

That person hasn't stopped wanting a home.

They're waiting.

Another buyer may have enough income to qualify but can't find an appropriate property.

They're waiting too.

Another may have been repeatedly outbid during the most competitive housing market and decided to take a break.

Another may be waiting for mortgage rates to improve.

Another might be trying to accumulate a larger down payment.

Individually, these are simply potential buyers.

Collectively, they can represent a substantial pool of future housing demand.

If market conditions improve enough, some of those buyers could return.

Mortgage Rates Could Be One of the Biggest Triggers

Mortgage rates have an immediate effect on home affordability.

When mortgage rates decline, the principal and interest payment associated with the same loan amount generally declines.

That can help buyers in two ways.

Some buyers may be able to afford a home that was previously outside their comfortable monthly budget.

Others may qualify for a larger mortgage amount.

This is why even buyers who aren't actively shopping tend to pay attention to mortgage rates.

But there's another side to falling rates that buyers shouldn't ignore.

Lower mortgage rates don't only improve your buying power. They improve everyone else's buying power too.

If rates decline enough to motivate a significant number of sidelined buyers to return at approximately the same time, competition could increase.

Lower Mortgage Rates Could Bring More Competition

This is one of the biggest reasons I don't think buyers should base their entire home-buying strategy on waiting for a specific mortgage rate.

Suppose rates decline significantly.

Your estimated payment improves.

That's good.

But thousands of other potential buyers may see the same improvement.

Some buyers who couldn't qualify previously may now qualify.

Others who decided to wait may begin scheduling showings again.

People who were comfortable renting may reconsider purchasing.

Suddenly, demand increases.

If housing inventory doesn't increase at the same pace, buyers could find themselves competing for the same homes.

That could mean faster sales, more multiple-offer situations and less negotiating leverage.

So the question isn't simply:

"Will mortgage rates go down?"

A better question is:

"What will the housing market look like if they do?"

Today's Slower Market Can Have Advantages

Pending sales being down isn't necessarily bad news for someone actively looking to buy.

A slower market can create opportunities.

We've already seen homes spending more time on the market compared with the extremely fast pace of the previous housing boom.

That can mean buyers have more time to evaluate properties.

There may be fewer bidding wars.

Sellers may be more willing to negotiate.

And buyers may have opportunities to request seller concessions that were difficult to obtain when sellers had multiple offers waiting.

Those are real advantages.

A slightly higher mortgage rate combined with a negotiated purchase and seller concessions can sometimes produce a better overall transaction than a lower-rate environment with intense competition.

The numbers need to be evaluated together.

Seller Concessions Can Make a Significant Difference

One of the biggest opportunities in a slower housing market can be seller assistance.

Depending on the mortgage program, transaction and applicable guidelines, a seller may be able to contribute toward certain allowable buyer closing costs.

For a buyer trying to preserve cash, that can be valuable.

Suppose a seller is willing to negotiate $10,000.

A buyer could potentially ask for a price reduction.

But depending on the circumstances, using some of that negotiating room toward eligible closing costs or a mortgage rate buydown might provide a greater financial benefit.

There isn't one answer that's right for every buyer.

That's why running actual mortgage scenarios before structuring an offer can be so useful.

More Housing Supply Could Help Unlock Demand

NAR's outlook also points to housing supply as part of the equation.

For years, insufficient inventory has been one of the biggest challenges facing the housing market.

When too many buyers compete for too few homes, prices tend to face upward pressure.

Limited inventory also makes it harder for buyers to find properties that meet their needs.

Increasing supply can help restore balance.

More homes for sale give buyers additional choices and can reduce the intense competition that characterized much of the post-pandemic housing market.

If supply continues improving while affordability also gets better, transaction activity could begin increasing.

But More Supply Doesn't Affect Every Market Equally

Housing is local.

A national increase in inventory doesn't mean every neighborhood suddenly has plenty of homes available.

One community might have significant inventory while a neighboring town remains extremely competitive.

Entry-level homes may face much stronger demand than luxury properties.

Single-family homes may behave differently from condominiums.

Coastal properties may have different trends than suburban properties.

That's why national housing statistics are useful for understanding broad trends, but they shouldn't replace an analysis of the market where you're actually buying.

The Northeast Is Holding Up Better Than Some Other Regions

The latest pending-sales data also showed meaningful regional differences.

The South and West experienced the largest year-over-year declines, while the Midwest increased 1.7% and the Northeast was relatively unchanged.

That's particularly relevant for buyers in New Jersey and Pennsylvania.

A relatively stable Northeast doesn't mean every local market is strong or competitive.

But it demonstrates why buyers shouldn't assume a national housing headline perfectly describes what's happening in their town.

Conditions in South Jersey can differ from North Jersey.

Philadelphia can differ from surrounding Pennsylvania suburbs.

Delaware can have very different conditions depending on whether you're looking in northern Delaware or near the beaches.

Florida can vary tremendously from one metro area to another.

Real estate isn't one market.

It's thousands of local markets.

What This Means for New Jersey Homebuyers

For buyers considering homes in New Jersey, affordability remains about much more than the mortgage rate.

Property taxes can vary substantially between municipalities.

Homeowners insurance matters.

The specific purchase price matters.

The amount of the down payment matters.

And competition varies depending on the community and price range.

Buyers searching in Williamstown, Washington Township, Sewell, Blackwood, Cherry Hill and throughout South Jersey may find very different conditions from one neighborhood to another.

A home that's properly priced in a desirable area can still sell quickly.

Another property may sit for several weeks and provide an opportunity to negotiate.

That's why buyers need to evaluate each property individually.

Pennsylvania Buyers Should Watch Both Rates and Inventory

Pennsylvania buyers face many of the same considerations.

Philadelphia and its surrounding suburbs offer a wide variety of housing markets, price points and inventory conditions.

If mortgage rates improve, demand could increase—particularly among buyers who have been waiting for better affordability.

That makes preparation important.

You don't necessarily need to purchase today.

But if you know you're likely to buy when conditions improve, getting your financial information organized now can put you in a much stronger position when you decide to move.

Delaware Buyers May Find Different Opportunities by Location

Delaware's housing market also varies considerably depending on location.

Northern Delaware buyers may have different priorities and market conditions from buyers considering coastal communities.

Some buyers prioritize commuting access.

Others are relocating.

Some are purchasing second homes or planning for retirement.

Each of those markets can respond differently to changes in mortgage rates and inventory.

The common denominator is that buyers should understand their financing before they start seriously negotiating.

Florida's Market Deserves Special Attention

The latest pending-sales report showed weakness in the South, and Florida is one market where buyers should pay particularly close attention to local conditions.

Florida has experienced significant changes in inventory, insurance costs and condominium expenses in various markets.

That can create opportunities for buyers—but it also means careful financial analysis is essential.

A Florida home's purchase price doesn't tell you the complete cost of ownership.

Buyers may need to consider:

• Homeowners insurance

• Flood insurance where applicable

• Property taxes

• HOA fees

• Condominium fees

• Special assessments where applicable

A property that appears inexpensive compared with another market may have significant ongoing expenses.

That's why mortgage planning should incorporate the complete housing payment whenever possible.

Employment Growth Is an Important Piece of the Housing Puzzle

The difference between housing activity and employment is one of the most interesting parts of the latest NAR data.

Payroll employment being approximately 5% above 2019 levels means the economy has more jobs than it did before the pandemic.

Yet pending home sales remain approximately 30% lower.

Employment alone doesn't guarantee someone can or will purchase a home.

But jobs provide the income that supports household formation and mortgage qualification.

If affordability improves while employment remains relatively strong, housing demand could respond.

That's the basis for the argument that significant pent-up demand exists.

What Happens If That Demand Returns?

Nobody can know exactly when sidelined buyers will return or how quickly it will happen.

But we can think through the possibilities.

If mortgage rates decline while inventory remains limited, buyer competition could increase.

If mortgage rates decline and inventory increases substantially at the same time, the market could absorb additional demand more comfortably.

If rates remain relatively stable but home prices moderate and incomes rise, affordability could gradually improve.

There are multiple paths toward a more active housing market.

That's why trying to identify one perfect moment to buy can be difficult.

Waiting Has Advantages—and Risks

There are perfectly legitimate reasons to wait before purchasing a home.

Maybe you're saving more money.

Maybe you're changing jobs.

Maybe your lease doesn't expire for several months.

Maybe you're working on your credit.

Maybe the current monthly payment doesn't fit your budget.

Those are sensible reasons.

But waiting solely because you're expecting the housing market to become dramatically easier can be more complicated.

If affordability improves, other buyers may return too.

You could potentially get a better mortgage rate but face higher competition.

Seller concessions might become less common.

Homes might sell more quickly.

Nobody can guarantee which combination of rates, prices and competition will exist several months from now.

Don't Buy Because You're Afraid of Missing Out

The opposite is equally important.

Pent-up demand isn't a reason to rush into buying a home you're not ready for.

You shouldn't purchase because you're afraid everyone else is about to enter the market.

Homeownership needs to fit your finances and your life.

You should understand the payment.

You should have appropriate funds available.

You should feel comfortable with the property.

And ideally, you should expect to own the home long enough for buying to make sense for your situation.

Housing-market statistics should inform your decision, not make the decision for you.

The Right Time to Buy Is Personal

People frequently ask whether it's a good time to buy a home.

There isn't one answer for everyone.

A better question is:

Is it a good time for you to buy?

That depends on your income, debts, credit, savings, employment, expected time in the property and comfortable monthly payment.

It also depends on what's available in your local housing market.

One buyer may be financially ready today.

Another may be much better positioned six months from now.

That's why mortgage planning should start with your personal numbers rather than a housing headline.

Mortgage Pre-Approval Can Help You Understand Where You Stand

If you're considering buying within the next several months, getting pre-approved can provide clarity even if you aren't ready to make an offer tomorrow.

We can review your financial situation and discuss:

• Your potential purchase price range

• Comfortable monthly payment targets

• Down-payment options

• Conventional mortgage options

• FHA financing

• VA financing for eligible borrowers

• USDA financing for eligible properties and borrowers

• Estimated closing costs

• Property tax considerations

• Homeowners insurance

• Mortgage insurance when applicable

Then, as you begin identifying specific properties, we can update the numbers.

That's much more useful than simply knowing a theoretical maximum purchase price.

Your Maximum Approval Isn't Your Target Price

This is something I emphasize frequently.

If you're approved to purchase a $600,000 home, that doesn't mean you should necessarily buy a $600,000 home.

Qualification and comfort are different things.

You may decide you're much more comfortable with the payment on a $525,000 property.

Or you might decide that you're willing to spend more because a particular home eliminates a commute, provides additional space or meets other important needs.

The lender can help establish the financial boundaries.

You decide where within those boundaries you're comfortable living.

Compare Specific Homes Using the Complete Payment

When you start finding properties you like, don't compare them solely by purchase price.

Send me the listings.

We can compare estimated payments using the actual property taxes and realistic insurance assumptions.

A $450,000 home in one municipality might produce a different payment from another $450,000 home because the taxes are different.

A slightly more expensive property could potentially have a surprisingly similar monthly payment if the taxes or insurance are lower.

The numbers matter more than assumptions.

Today's Slower Market Could Be Tomorrow's Opportunity

Pending home sales remain subdued.

That's the reality of today's housing market.

But the gap between current transaction levels and employment suggests that there may be many potential buyers waiting for conditions to improve.

If affordability improves through some combination of lower mortgage rates, increased housing supply, moderating home prices or rising incomes, more of those buyers could return.

For buyers who are financially ready today, the current environment may offer something valuable:

less competition.

That doesn't mean every home is negotiable.

It doesn't mean prices are about to fall.

And it doesn't mean you should rush to buy.

It simply means today's market may offer opportunities that could change if buyer demand strengthens.

Planning to Buy? Prepare Before the Market Changes

If you're considering purchasing a home in New Jersey, Pennsylvania, Delaware or Florida, you don't need to predict exactly what the housing market will do next.

You need to know your numbers.

Let's determine what you may qualify for, what monthly payment you're comfortable with, how much cash you'll need, and which mortgage programs may fit your situation.

Then you can evaluate opportunities based on your own finances rather than trying to time the entire housing market.

Pending home sales may be below normal levels today, but if NAR's assessment of significant pent-up demand proves correct, today's quieter housing market could look very different as affordability and inventory improve.

Being prepared gives you the ability to decide when the opportunity is right for you.

Mortgage Mike – Michael DeSantoCrossCountry MortgageNMLS #1766709Licensed in New Jersey, Pennsylvania, Delaware and Florida