Pending home sales remain sluggish, but mortgage applications — and home touring activity — have ticked up as 30-year rates hold at 10-month lows.

Key points:The 30-year fixed-rate mortgage ticked down slightly this week, hitting 6.56% ahead of potential short-term interest rate cuts in September.Pending sales slowed between June and July, with housing affordability an ongoing hurdle for many potential buyers.Despite buyer hesitancy, home touring is up — a sign that buyers are still interested in exploring their options heading into the fall.

As mortgage rates hover around 10-month lows, homebuyers are sending mixed signals about whether the recent drop in rates will be enough to entice them back into the market.

The 30-year fixed-rate mortgage averaged 6.56% this week, down slightly from 6.58% the previous two weeks, according to Freddie Mac. This is the lowest that mortgage rates have dropped since October 2024, although rates have remained in a narrow and relatively stable range since February.

Buyer hesitancy persists despite lower rates

Though rates have stayed in the 6.6-6.9% range throughout the summer, this has not stirred much buyer interest. Pending home sales in July dropped 0.4% compared to June but increased 0.7% year-over-year, according to the National Association of Realtors.

“Even with modest improvements in mortgage rates, housing affordability, and inventory, buyers still remain hesitant,” said NAR Chief Economist Lawrence Yun, adding that if mortgage rates continue to decline, that “should steadily enlarge the pool of eligible home buyers in the upcoming months.”

Plodding pending sales are a sign that buyer hesitancy isn’t just about mortgage rates — confidence also factors in, according to Sam Williamson, senior economist at First American.

“Buying a home is the biggest financial decision most people make, and uncertainty around jobs, inflation, and the broader economy is keeping many on the sidelines,” he said.

Mortgage application activity stays solid

Though the market is slow, applications for mortgages are showing some signs of life. Overall activity was down 0.5% for the week ending on Aug. 22, according to the Mortgage Bankers Association, but seasonally adjusted purchase applications ticked up 2% from the previous week and were up 25% year-over-year.

“Prospective buyers appear to be less sensitive to rates at these levels and are more active, bolstered by more inventory and cooling home-price growth in many parts of the country,” said Joel Kan, MBA’s vice president and deputy chief economist.

The market is ‘stuck’ — for now

Though there are some indications that the market is shifting in buyers’ favor, “we are in a ‘stuck’ market, which is likely where we will stay as we head into fall,” according to Lisa Sturtevant, chief economist at Bright MLS. Sellers feel stuck because they are not getting the offers they want, and buyers feel the same way because prices remain high even with more inventory.

“While the Fed is likely to cut interest rates at their September meeting, it is not at all certain that mortgage rates are going to come down. As a result, buyers and sellers are still going to be cautious and the market could remain gridlocked this fall,” Sturtevant said.

There is hope for an uptick before the year ends

Other economic data provides a bit more optimism for a market resurgence later this year. Redfin’s Homebuyer Demand Index — which tracks home tours and other buyer services — was up about 3% month-over-month in August. However, demand levels have not increased in all markets, suggesting potential buyers are still hesitating in some parts of the country.

Those who are ready to buy a home will find less competition, more inventory and greater negotiating power in a greater number of locations, according to Kara Ng, senior economist at Zillow.

Zillow’s latest market heat index showed that 27 major metro areas have shifted into neutral or buyers market territory — up from 24 one month earlier. All of the major buyers markets are in the South, with Cape Coral, Florida, serving as the most buyer-friendly. 

Meanwhile, most of the strong sellers markets are in California and the Northeast, with the strongest in Rochester, New York.