Homebuyers are bailing

Home-shoppers are throwing in the towel on open houses and retreating to the beach this summer: Existing home sales sank 1.7% in July to a three-month low of 4.06 million, according to the National Association of Realtors.

This slump comes courtesy of soaring mortgage rates, which hit a one-year high of 6.81% for a 30-year fixed-rate loan in the last week of July, according to the Mortgage Bankers Association. And although rates have subsided a bit since then to 6.77%—causing a small uptick in mortgage applications—buyers still haven’t returned in full force.

Then there’s prices. The NAR found that the median sales price rose 2% year over year to $434,100—the highest of any July on record, trailing only June’s all-time high of $442,800.

In short: High prices and rising rates are a one-two punch punishing the housing market.

Even the industry’s giants can’t sugarcoat this slowdown. In an earnings call last week, Rocket CEO Varun Krishna called the quarter ending in June “one of the toughest spring housing markets in years.” Meanwhile, Zillow CFO Jeremy Hofmann noted that the mortgage market could dwindle by “low-to-mid-single digits.”

The K-shaped housing market: Sales of affordable starter homes fell 5.4% in May year over year, according to Zillow data, while luxury sales rose 6.2%. Essentially, the latest AI-minted millionaires are having zero trouble splurging on their digs, while the rest of America sits on the sidelines hoping for better days ahead.

Cloudy with a chance of higher rates

Mortgage industry software platform Optimal Blue expects 30-year rates to rise to 6.76% over the next three months before easing to 6.58% by the end of the year. Even so, rates will remain unpredictable as the Iran war drags on, bending to erratic oil prices and volatile inflation. Zillow Senior Economist Kara Ng notes, “From the affordability point of view, it’s going to get more challenging in the second half of the year.”

But there are a few bright spots. Goldman Sachs anticipates annualized existing home sales of 4.2 million in the second half of 2026—a slight 3% improvement over the first half of the year. Zillow’s latest forecast through June 2027 predicts that home prices will drop in roughly half of the 100 largest US metro areas. So depending on where you live, those painful price tags could ease up somewhere down the line.

And although spring is famed for being the housing market’s supposed “busy season,” fall is actually the best time to buy a home, with over 30% more listings, 30% fewer buyers, and $15,000 in savings on the typical house. This is particularly true for more affordable properties, since as Zillow’s Ng points out, “If you are financially qualified to buy a starter home, you are facing less competition and you’re more likely to get a price cut.”

In other words, by the time you’re sipping a pumpkin spice latte, you need to start hitting open houses again.—JD