Pending Home Sales Decline in July 2025 as Canceled Contracts Hit Record High, Signaling Buyer Hesitation
Washington, D.C. – August 28, 2025 – The U.S. housing market showed signs of continued stagnation in July, with pending home sales ticking down 0.4% from June amid a sharp spike in contract cancellations, according to the latest report from the National Association of Realtors (NAR). While sales pacts rose 0.7% year-over-year, the monthly dip—coupled with buyers walking away from deals at the highest rate on record—highlights persistent affordability challenges and seller pricing resistance in a market still grappling with elevated mortgage rates and limited inventory.
The NAR’s Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts for existing homes, fell to 72.5 in July from 72.8 in June, marking the second consecutive monthly decline following a 0.8% drop in June. Regionally, sales declined in the Northeast and Midwest, remained essentially flat in the South, and saw a modest increase in the West. Year-over-year, gains were recorded in the Midwest and South, but declines persisted in the Northeast and West.
“Even with modest improvements in mortgage rates, housing affordability, and inventory, buyers still remain hesitant,” said Lawrence Yun, NAR’s chief economist. “Buying a home is often the most expensive purchase people will make in their lives. This means that going under contract is not a decision homebuyers make quickly. Instead, people take their time to ensure the timing and home are right for them.”
Record Cancellations: Buyers Backing Out Amid Affordability Woes
Compounding the slowdown, contract cancellations surged to 15% in July—the highest rate since Redfin began tracking the metric in 2017—based on an analysis of Multiple Listing Service (MLS) data. This marks a significant increase from the previous high of around 12-13% in prior months, driven by buyers citing unexpected repair costs, financing hurdles, and cooling enthusiasm for high prices. The spike was most pronounced in the Sun Belt states of Texas and Florida, where markets have been overheated by migration and investor activity.
- San Antonio, TX: 22.7% cancellation rate, fueled by rapid price appreciation outpacing wages.
- Fort Lauderdale, FL: 21.3%, with buyers hit by insurance premiums and hurricane risks.
- Tampa, FL: 19.5%, reflecting similar affordability strains in a tourism-dependent region.
Redfin economists attribute the trend to a “Cruel Summer” for buyers, where persistent high rates (averaging 6.8-7% in July) and median home prices near $422,400 have squeezed budgets, even as inventory edged up slightly to 4.6 months’ supply. “Buyers remain squeezed by affordability challenges while sellers have been slow to adjust expectations, leaving the housing market stuck in neutral,” noted Realtor.com senior economist Jake Krimmel.
NAR’s Realtors Confidence Index survey underscores the pessimism: Only 16% of members anticipate increased buyer traffic over the next three months, unchanged from a year ago, while 21% expect more seller activity, up from 17% in July 2024. This suggests a cautious recovery, with potential Federal Reserve rate cuts later in 2025 offering hope but not immediate relief.
Regional Breakdown and Broader Market Context
The July PHSI data provides a snapshot of uneven recovery across the U.S.:
| Region | Month-over-Month Change | Year-over-Year Change |
|---|---|---|
| Northeast | -1.2% | -0.5% |
| Midwest | -0.9% | +1.2% |
| South | -0.1% (flat) | +1.8% |
| West | +0.6% | -0.3% |
The West’s modest gains reflect slight inventory improvements, while the Northeast’s decline ties to the strongest home price growth in the nation, exacerbating affordability. Nationally, the PHSI has hovered below 100 (the 2001 benchmark) for much of 2025, indicating subdued activity compared to historical norms.
This report follows a 2.0% increase in existing-home sales for July (reported earlier this month), bringing the seasonally adjusted annual rate to 4.01 million units. However, pending sales lead closings by 45-60 days, so July’s dip could signal softer August and September volumes unless rates fall further. Yun added that rising mortgage applications hint at “more serious buyers” emerging, but many are holding off until financing aligns better.
Implications for Buyers, Sellers, and the Economy
For buyers, the data paints a picture of caution: With cancellations at record levels, entering a contract requires due diligence on inspections and financing to avoid costly walkaways. Sellers, meanwhile, may need to temper expectations, as delistings have surged 47% year-over-year per Realtor.com, with many opting to wait out the market rather than cut prices.
Economists view this as part of a broader “neutral” housing sector, where wage growth (now outpacing home prices) offers glimmers of hope but is offset by high rates and low construction. The Federal Reserve’s signaled rate cuts could boost eligibility for more buyers, potentially enlarging the pool in Q4 2025. However, without addressing undersupply—exacerbated by lagging homebuilding—the market remains vulnerable to stagnation.
As the housing sector influences broader economic indicators like consumer spending and construction jobs, stakeholders are watching closely. The next Pending Home Sales report for August is due September 29, which could provide clues on whether the summer slump persists into fall.
Sources: National Association of Realtors (NAR), CNBC, Redfin, Realtor.com