This is why the housing market has been hit so hard this summer

Two different housing market readings released Thursday point to the same problem, and the problem appears to be getting worse. Housing is very expensive – to own and build.

Pending home sales in June, a measure of contracts signed on existing homes, fell 5.4% from May, according to the National Association of Realtors. Sales fell 0.3% from June 2025 and were well below analysts’ expectations.

This reading is based on people going out shopping for homes in June and deciding to sign a deal, so it is a more appropriate measure of the state of the market.

“The highest mortgage rates in nearly a year and the record-high national average home price are together contributing to a tepid housing market that is especially difficult for first-time homebuyers,” Lawrence Yun, NAR’s chief economist, said in a statement.

Mortgage rates in June bounced around a narrow but higher range, with the average 30-year fixed mortgage rate starting the month at 6.6% and ending at exactly the same rate, according to Mortgage News Daily. It had reached 5.99% at the end of February, that is, the day before the start of the war on Iran.

Mortgage demand from homebuyers declined last month. Last week, mortgage applications to purchase a home were 2% lower than in the same week a year earlier, although mortgage rates were slightly higher last year.

Meanwhile, sentiment among the nation’s single-family builders declined in July, according to another report released Thursday by the National Association of Home Builders. It fell to 34, down from an upwardly revised reading of 36 in June. Sentiment has remained below 40 for 15 straight months, the longest such period since 2012. Anything below 50 is considered negative sentiment.

“Affordability remains a key challenge for the homebuilding industry, as high mortgage rates, expensive land, rising material prices, and an ongoing skilled labor shortage continue to impact the market,” Robert Dietz, NAHB’s chief economist, said in a statement.

A growing share of builders, 37%, cut prices in July, up from 35% in June and 32% in May. Sales incentive use was 63% in July, up slightly from 62% in June, marking the 16th straight month in which the share was 60% or higher, according to NAHB.

Recent housing legislation from Congress, which attempts to cut red tape and help localities expedite the issuance of housing permits, “is a positive step that will help expand housing supply and lower overall housing costs, although more policy change is needed at the state and local levels,” Dietz said.

Existing home prices continue to rise, with the average hitting a new record high in June, according to NAR. Although there are pockets of local weakness, overall low housing supply keeps upward pressure on prices.

“Bottom line, housing remains the negative factor in the US economy, and according to NAHB makes up about 15-18% of the US economy overall,” wrote Peter Boockvar, chief investment officer at OnePoint BFG Wealth.