Homebuyer ‘malaise’ evident as sales, applications fall
With mortgage rates still elevated, pending and new home sales — along with mortgage applications — have all trended down as affordability weakens.
Key points:
- New home sales were sluggish in April, down 6.2% compared to March and down 11.3% from a year ago, while pending home sales dipped for a second straight week.
- Mortgage rates remain fairly steady, ticking up to 6.53%, but mortgage applications fell week-over-week. Affordability was also down from March to April.
- Foreclosure rates are starting to rise, a situation that “warrants close monitoring,” according to one economist.
While better than a year ago, housing affordability continues to deteriorate — and that's slowing the spring season on a national scale.
Mortgage applications and pending sales were down this week, as were April new home sales — signs that the Iran war, high energy prices and low consumer confidence continue to counteract underlying demand.
"The malaise of home buyers seems to be pervasive in the market, leading to fewer transactions even as conditions favor those same buyers," Joel Berner, senior economist at Realtor.com, said in reference to the new home sales data.
An April slump for new home sales
The number of new homes sold in April was down 6.2% compared to March and off by 11.3% year-over-year, according to the U.S. Census Bureau.
"Expect builders to continue to pull back on single family home construction if sales remain weak, and expect more price reductions and buyer incentives to be offered to sweeten the deal for reluctant buyers," Berner said.
For those buyers who can be enticed, there are more choices: New home inventory was at 9.4 months in April, up from 8.7 months in March and 8.6 months a year ago.
Even with the slowdown, new home sales continue to outperform existing home sales and are above pre-pandemic levels — a sign that demand is still out there, according to Odeta Kushi, deputy chief economist at First American.
"Builders remain better positioned than existing homeowners to respond to affordability challenges through incentives, mortgage-rate buydowns, and smaller floor plans. While higher rates are clearly weighing on near-term momentum, the longer-run demand backdrop for housing remains constructive," Kushi said.
Mortgage rates steady, but war still causing pressure
It was a relatively quiet week for mortgage rates as bond investors searched for clues about what might happen next with the Iran war. The 30-year fixed-rate mortgage averaged 6.53% this week, according to Freddie Mac's survey, up from 6.51% a week earlier.
While on the rise, mortgage rates haven't reached the levels seen a year ago when tariff-related turmoil pushed rates up to 6.89% at the end of May 2025, noted Jake Krimmel, senior economist at Realtor.com.
"Buyers have more homes to choose from and asking prices continue to soften, but their dollars don't stretch as far as they did a few months back," Krimmel said. "A resolution to the [Iran] conflict, therefore, would do a world of good for mortgage rates, consumers, and housing market momentum."
Pending sales, mortgage applications fall
Pending home sales were down for the second straight week, falling 1.5% according to Redfin. New listings also rose slightly for the week, providing more options for buyers who are willing to come off the sidelines — but many are still cautious, said Jason Gale, a Redfin Premier agent in New Orleans.
"Sellers can entice those buyers by pricing slightly below recent comps, making minor repairs and staging so the house makes the best first impression it possibly can, and offering incentives like rate buydowns, repair credits or a flexible closing date," Gale said.
Mortgage activity was down 8.5% for the week ending May 22, according to the Mortgage Bankers Association. Much of that pullback came in refinance applications; purchase applications were down 2% compared to the week before but up 5% from a year ago.
Affordability worse in April, but better than 2025
The MBA also noted that housing affordability weakened last month as the median monthly payment for purchase applicants ticked up from $2,131 in March to $2,153 in April.
"However, affordability remains improved compared to a year ago, supported by lower mortgage rates and continued income growth," said Edward Seiler, MBA's associate vice president of housing economics. "Looking ahead, continued income gains and some stabilization in mortgage rates could help support better affordability conditions."
Foreclosure uptick 'warrants close monitoring'
Given the spike in energy prices and other inflation pressures facing consumers, another area to watch is foreclosures. The foreclosure inventory rate rose to 0.4% in March, the highest level in six years, according to the latest data from Cotality.
While still below pre-pandemic levels, the "shift reflects a gradual transition from the historically low levels seen through 2024," said Molly Boesel, senior principal economist at Cotality. The highest delinquency rates are in the South, with Louisiana, Mississippi and Alabama topping the list.
"While overall mortgage performance remains relatively stable, the growing number of metros with rising foreclosure rates points to emerging pressure in pockets of the housing market that warrants close monitoring," Boesel said.