U.S. housing market faces affordability squeeze as sales, builder sentiment weaken

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US housing affordability squeeze

Highlights

Pending home sales drop 5.4% in June from May and decline 0.3% year over year, falling short of analysts' expectations due to high mortgage rates and record prices.
NAHB single-family builder sentiment decreases to 34 in July, below 40 for 15 consecutive months, as 37% of builders cut prices and 63% offer incentives amid affordability headwinds.
Despite recent federal housing legislation, June’s national median home price hits a new record as persistently low supply keeps prices elevated and housing remains a drag on the broader U.S. economy.

June sales and July builder data signal mounting strain

As reported by CNBC, two housing market readings released Thursday point to affordability as the central problem for both buyers and builders.

Pending home sales in June, which track signed contracts on existing homes, fall 5.4% from May, according to the National Association of Realtors. They are down 0.3% from June 2025 and come in below analysts' expectations, making the data one of the timeliest indicators of buyer demand.

NAR Chief Economist Lawrence Yun says in a release that the highest mortgage rates in nearly a year, combined with a record-high national median home price, are contributing to a tepid market that is especially difficult for first-time buyers. Mortgage rates in June move within a narrow but elevated range, with the average 30-year fixed rate starting and ending the month at 6.6%, according to Mortgage News Daily.

Mortgage demand from homebuyers has also been weakening in the past month. Last week, applications for a mortgage to buy a home are 2% lower than the same week a year earlier, even though rates were slightly higher last year.

Affordability pressures weigh on construction and the broader economy

Sentiment among the nation's single-family builders falls to 34 in July from an upwardly revised 36 in June, according to the National Association of Home Builders. Builder sentiment remains below 40 for 15 straight months, the longest such stretch since 2012, and any reading below 50 indicates negative sentiment.

NAHB Chief Economist Robert Dietz says in a release that affordability remains the industry's main challenge as elevated mortgage rates, expensive land, rising material prices and persistent skilled labor shortages continue to affect the market. A growing share of builders, 37%, cuts prices in July, up from 35% in June and 32% in May, while 63% use sales incentives, marking a 16th consecutive month at 60% or higher.

Dietz says newly enacted housing legislation from Congress that aims to reduce red tape and help localities speed up permitting is a positive step for expanding supply and lowering overall costs, though he says more policy change is needed at the state and local level. Even so, existing home prices continue to rise and the median reaches a new record in June, as limited supply keeps pressure on prices despite weaker pockets in some local markets.

Peter Boockvar, chief investment officer at OnePoint BFG Wealth, says housing remains a drag on the U.S. economy. He notes, citing NAHB, that housing accounts for roughly 15% to 18% of the U.S. economy overall.

Our previous report covered House Republicans advancing a Fiscal Year 2027 budget resolution to unlock the reconciliation process and move priorities such as a proposed $67 billion defense supplemental, food security measures, and voter ID requirements without Democratic support. The article also noted related GOP efforts to reshape financial regulation through House scrutiny of the Consumer Financial Protection Bureau, including proposals to bring the CFPB under appropriations and adjust its oversight and enforcement framework.

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