Stumbling housing market may have already hit its 2026 peak
While closed home sales perked up in July, pending sales and mortgage application data suggests another market slowdown is on the way.
Key points:
- Completed home sales ticked up in July, but both pending sales and mortgage applications have slowed, signaling a downshifting market.
- Homebuyers are still sensitive to rising mortgage rates, which at 6.69% for the week ending Aug. 6 are higher now than a year ago.
- However, the summer slowdown is expected to boost inventory, which should give would-be buyers more choices heading into the fall.
July brought a mix of good and bad news for residential real estate, but with mortgage rates ticking higher and pending sales slowing, some economists warn that the housing market may have already reached its pinnacle for the year.
The good news: Homebuyers appear to have taken advantage of a slight dip in mortgage rates in June, with Zillow estimating that completed home sales jumped 7% in July — the strongest year-over-year change so far in 2026.
The bad news: New home purchase contracts stalled last month as mortgage rates climbed again, flatlining summer housing market momentum. Meanwhile, economists at Zillow and Redfin noted significant drops in pending sales, with Zillow estimating a 7.7% month-over-month drop in July and Redfin reporting a 3.7% week-over-week drop as of Aug. 6.
"July was a strong month for existing home sales, but unfortunately it may represent the peak of what we can expect for the rest of the year," Zillow Chief Economist Mischa Fisher said.
Persistently elevated rates provide no relief
Mortgage rates are still rising, which may further dampen demand. The 30-year fixed-rate mortgage averaged 6.69% this week, up from 6.66% a week ago, according to Freddie Mac.
The 30-year rate is higher now than it was a year ago. That hasn't happened in 44 weeks, according to Danielle Hale, chief economist at Realtor.com.
"Recent mortgage rate volatility makes it a challenging time for homebuyers to navigate the market, especially as this volatility is coming at the upper end of the mortgage rate range we've seen over the last year," Hale said.
Where mortgage rates go next may hinge on the upcoming jobs and inflation reports for July (due out Aug. 7 and Aug. 12, respectively). A Department of Labor report released Aug. 6 showed initial jobless claims at 199,000, a slight rise for the week but a level that still suggests the U.S. labor market is healthy.
Loan applications fall
Rising rates have led to a slowdown in mortgage applications, with overall applications falling 2.9% week-over-week during the last week of July, according to the Mortgage Bankers Association (MBA).
"Application volume for both refinance and purchase loans declined for the week, and are now running behind last year's pace," observed Mike Fratantoni, MBA's SVP and chief economist.
These declines indicate "that higher mortgage rates have weakened overall demand," Fratantoni added.
Inventory poised to grow
The slowing pace of home sales should lead to a rise in inventory and more choices for would-be buyers as they return from summer vacations, noted Mike Simonsen, chief economist at Compass.
"The supply picture for the rest of the year is for slightly expanding availability of homes on the market nationally," Simonsen said in his weekly YouTube update. "We could see supply growth in the inventory-starved Northeast, so that's a good sign."
Zillow estimated that active inventory was 1.5% higher in July than a year earlier and up 0.9% compared to June, while new listings were up 3.1% year-over-year but down 4.2% from June.