Pending sales drop as home prices surge: are home buyers getting sticker shock?

House hunters are tapping the brakes as record-high prices are cooling buyer activity, new data shows.

According to the latest Redfin report, the median home sale price reached an unprecedented $397,954 in June, marking a 4.9% increase since last year and the largest jump since March.

However, this price surge coincides with a 4.6% drop in pending sales—the largest decline in four months.

Pending sales are homes that are under contract but haven't been finalized yet. They give us an early look at how active the housing market is. The significant drop in pending sales means fewer buyers are committing to buying homes, probably because they can't afford the high prices.

The median asking price climbed even higher than sale prices, hitting $409,975—a 6.1% jump from the previous year. This aggressive pricing reflects sellers' confidence in a market where inventory, though improving, remains tight.

Cities like Anaheim, Newark, and Nassau County have seen the highest price increases. In contrast, markets such as Austin, Dallas, and San Antonio have experienced rare price declines, potentially offering some relief to house hunters in these areas.

Mortgage payments go down, but only slightly

A slight decrease in mortgage payments, along with an increase in housing supply, is what Redfin calls the "good news" in an otherwise challenging market.

"There are more new listings to choose from, and monthly housing payments are down nearly $100 from their April peak as mortgage rates decline,” Redfin’s most recent report read.

However you slice it, however, affordability is still an issue. The median monthly mortgage payment now stands at $2,749. This is down $88 from the all-time high set at the end of April this year but still represents a significant financial burden for many potential homebuyers.

Do pending sales numbers point to a recession?

Economist David Rosenberg weighed in earlier this month, suggesting that the U.S. is in a housing recession based on the National Association of Realtors' pending home sales data from May.

Rosenberg noted that the pending home sales indicator has fallen below the Covid crash levels of April 2020 and is now "the weakest since the series began in the 2001 downturn…but there’s no recession coming, right? Sure.”

However, not all experts share this pessimistic view. NAR chief economist Lawrence Yun offers a more optimistic perspective, describing the housing market as "at an interesting point with rising inventory and lower demand."

“Supply and demand movements suggest easing home price appreciation in upcoming months. Inevitably, more inventory in a job-creating economy will lead to greater home buying, especially when mortgage rates descend,” said Yun.

Redfin's report also highlights that some regions might see more stability soon. Increased listings and slight dips in mortgage rates could potentially ease the pressure for buyers in those areas.