Will Falling Rates Signal the Dawn of a Buyer’s Market?

The latest report from the National Association of Realtors (NAR) shows a nuanced picture for the U.S. housing market. Pending home sales dipped slightly by 0.4% in July 2025 compared to June, but they remain up 0.7% from the same period last year. Pending sales measure homes under contract, offering a forward-looking glimpse of future closings.

“Even with moderate relief in mortgage rates and slightly improved affordability, buyers are still cautious,” said NAR Chief Economist Lawrence Yun. “Purchasing a home remains one of the largest financial decisions people make. Homebuyers are careful, weighing both timing and price before committing.”

Regional Trends Highlight Uneven Recovery

The national numbers mask significant regional variation. In July, the Northeast and Midwest saw declines in pending sales, while activity in the South remained largely flat and the West saw modest gains. Year-over-year comparisons show a mixed landscape: sales decreased in the Northeast and West but climbed in the Midwest and South.

“Pending home sales continue to reflect a market moving slowly through summer,” said Realtor.com Senior Economist Jake Krimmel. “July’s slight month-over-month decline follows June’s sharper 2.8% drop, signaling a tentative rebound. Regionally, the West experienced a 3.7% increase month-over-month, though it remains 1.9% below last year. The Midwest contracted 4% from June but showed a 1.3% annual gain. Meanwhile, the Northeast fell 0.6% on both a monthly and yearly basis, and the South reported nearly flat monthly sales with a 1.8% annual gain.”

Stuck Between Buyers and Sellers

Bright MLS Chief Economist Dr. Lisa Sturtevant describes the current market as “stuck” rather than decisively favoring buyers or sellers. “Sellers aren’t receiving the offers they hope for, which is prompting delistings, while buyers face high prices and persistent affordability challenges despite greater inventory,” she explained. This in-between stage may continue into the fall as the market digests changing interest rates and buyer behavior.

The Realtors Confidence Index survey for July provides further insight. Only 16% of NAR members expect buyer traffic to increase over the next three months, unchanged from last year. Meanwhile, 21% anticipate more seller activity, up from 17% in July 2024, reflecting growing optimism among sellers hoping to capitalize on still-strong home prices.

Mortgage Activity as an Early Indicator

Rising mortgage applications for home purchases indicate potential future activity, Yun noted, even if those inquiries have yet to convert into signed contracts. “If the Federal Reserve moves toward a lower interest rate policy, more buyers may become eligible and active in the coming months,” he added.

At the recent Federal Reserve Bank of Kansas City economic symposium in Jackson Hole, Chair Jerome Powell highlighted the delicate balance between inflation and employment. “Inflation risks are skewed to the upside while employment risks remain to the downside.

Our framework requires careful balancing. With the policy rate now 100 basis points closer to neutral, the labor market’s stability allows measured consideration of rate adjustments. The current stance, still restrictive, may warrant future recalibration,” Powell said.

The next Federal Open Market Committee (FOMC) meeting, scheduled for September 16–17, will be closely watched for any changes in monetary policy that could influence mortgage rates and housing demand.

Mortgage Rates and Buyer Incentives

Mortgage rates have recently dipped to a 10-month low, with Freddie Mac reporting the 30-year fixed-rate mortgage at 6.56% as of August 28, down slightly from 6.58% the previous week. A year ago, the same rate averaged 6.35%. Lower rates, even modestly, can expand the pool of potential buyers, improving affordability and incentivizing some hesitant buyers to enter the market.

Krimmel noted, “Pending home sales often foreshadow existing home closings by one to two months. Existing home sales improved slightly in July but may return to long-term trends soon. New home sales fell 8.2% year-over-year, even as new-construction premiums dropped to historically low levels. The combination of declining mortgage rates and the potential for Fed action in September may pull more buyers off the sidelines, signaling early signs of a market shift.”

Looking Ahead

Housing experts caution that the market is unlikely to immediately transition into a classic buyer’s market, where buyers hold the upper hand. “We may see pockets of opportunity, particularly in regions with growing inventory and moderating prices,” said Sturtevant. “But until affordability improves broadly and interest rates stabilize or fall further, both buyers and sellers will remain navigating uncertainty.”

For now, the market is in a delicate holding pattern buyers weighing options, sellers recalibrating expectations, and economists watching for signals from both interest rates and broader economic trends. How this balance shifts over the fall will likely set the tone for the housing market into 2026. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.