High costs squeeze buyers and builders in summer housing slump
New reports from Realtors and home builders show high mortgage rates and rising costs are weighing on both home sales and construction.
By Daniel Okafor · Business Editor
3 min read
Two housing reports released Thursday showed fresh weakness in the U.S. market, with would-be buyers pulling back and builders growing more pessimistic. The common strain is affordability, as elevated mortgage rates, high home prices and rising construction costs make homes harder to buy and build.
Pending sales of existing homes fell 5.4% in June from May, according to the National Association of Realtors. The trade group said pending sales, which track signed contracts before closing, were 0.3% lower than in June 2025 and came in below analysts’ expectations.
The pending-sales measure is closely watched because it reflects shoppers who were active in the market during June and chose to sign purchase agreements. The National Association of Realtors said the data point to a weak summer for existing-home demand.
Lawrence Yun, chief economist at the National Association of Realtors, said in the group’s release that mortgage rates near their highest level in almost a year, along with a record national median home price, are making conditions especially difficult for first-time buyers.
Mortgage News Daily said the average rate on the 30-year fixed mortgage began June at 6.6% and ended the month at the same level after moving within a narrow range. CNBC reported that the average 30-year fixed rate had risen to 6.64% as the latest housing data arrived.
Rates had been as low as 5.99% at the end of February, according to Mortgage News Daily. CNBC also reported that purchase mortgage applications last week were 2% below the same week a year earlier, even though mortgage rates were slightly higher at that point last year.
Builders are also feeling the pressure. The National Association of Home Builders said its single-family builder sentiment index dropped to 34 in July from an upwardly revised 36 in June.
The NAHB said readings below 50 signal negative sentiment. The index has been under 40 for 15 months in a row, the longest such run since 2012, according to the builders’ group.
Robert Dietz, chief economist at the National Association of Home Builders, said affordability remains the industry’s main obstacle. He cited high mortgage rates, expensive land, rising materials costs and ongoing shortages of skilled labor as factors weighing on the market.
More builders are cutting prices to draw buyers, according to the NAHB. The group said 37% of builders reduced prices in July, up from 35% in June and 32% in May.
The NAHB also said 63% of builders used sales incentives in July, slightly above 62% in June. The July reading marked the 16th straight month in which at least 60% of builders reported using incentives, according to the group.
Dietz said new federal housing legislation aimed at reducing red tape and helping local governments speed permitting could help expand supply and reduce housing costs. He said more changes are still needed at the state and local levels.
Existing-home prices remain under upward pressure because supply remains limited, according to the National Association of Realtors, which said the national median price reached a record in June. Peter Boockvar, chief investment officer of OnePoint BFG Wealth, wrote that housing remains a weak spot for the U.S. economy and cited NAHB estimates that housing accounts for about 15% to 18% of the economy overall.
This story draws on original reporting from CNBC.