Mortgage rates climbing above 6.64% are cooling buyer demand, but the housing market remains resilient compared to last year. Purchase applications dropped 7% week-over-week and fell 2% annually, signaling pullback among borrowers sensitive to higher financing costs. Yet pending sales data tells a different story. Pending sales contracts, which measure homes under agreement to sell, remain ahead of their 2025 pace, suggesting deals continue moving forward even as new buyer interest softens.
The divergence between weakening purchase applications and stronger pending sales reflects market dynamics in flux. Buyers already locked into deals are proceeding, while prospective purchasers hesitate at current rates. This creates a two-tier market where transaction momentum depends on which stage of the buying cycle you examine.
For buyers, rates above 6.64% mean higher monthly payments on the same property. A $400,000 home financed at 6.64% costs roughly $100 more per month than at 6%. That accumulates to $1,200 annually in additional interest expense, pricing some households entirely out of deals. Sellers benefit from reduced competition as fewer buyers enter the market, though fewer active purchasers also limits their audience. Inventory-constrained markets could maintain price supports, but areas with surplus supply may face pressure.
The market growth question hinges on rate trajectory. If rates remain elevated, purchase applications will likely continue declining, eventually dragging down closed sales and new listings. Refinancing activity also disappears at these levels, removing a secondary revenue stream for lenders. However, if rates stabilize around 6.64%, buyers adjust expectations and the application slide may bottom out. Employment remains strong, supporting borrower qualification, and existing homeowners with low rates rarely sell, keeping inventory tight.
The pending sales outpacing 2025 suggests a lag effect. Contracts signed weeks ago