Solid July Home Sales May Not Be a Sign of What’s to Come

July was one of the housing market’s best months, on paper at least, as home sales rose 7% from a year earlier, the biggest yearly gain of 2026.

But Zillow said that number is, in reality, a snapshot of the past.

According to Zillow, the sales that closed in July were mostly deals struck weeks earlier, in June, when mortgage rates were easing and buyers who had been waiting finally jumped in.

The brokerage said that a better sign of where things are heading is what buyers are doing right now, and that picture is not encouraging.

The number of homes going under contract barely rose from a year ago, up just 0.3%, and fell 7.7% from June, Zillow noted.

“The 7% jump looks strong, but a closer look takes some air out of that headline figure,” said Mischa Fisher, Chief Economist at Zillow. “Fewer new deals are coming together now and the momentum is clearly fading, so some regions could see sales go flat or slip for the rest of the year.”

An Advantage Slipping Away

For most of this year, Zillow said that buyers had at least one thing working in their favor: cost.

The monthly payment on a typical home was $1,888 in July, 0.9% lower than a year ago, even as the typical home value rose 1.1% to $371,757, Zillow said. That advantage is now slipping away, Zillow noted.

A spike in oil prices this summer stoked fresh inflation worries and pushed mortgage rates to their highest point in 11 months. Zillow noted that unless rates come back down, the typical payment will be higher than it was a year ago by August.

And, that’s likely to keep more shoppers on the sidelines.

Zillow noted that the affordability edge that’s been a silver lining to an otherwise disappointing shopping season may disappear in the coming months.

The market’s one steady bright spot is the growing number of homes for sale, Zillow said.

There were 1.41 million homes on the market in July, up 1.5% from a year ago, making it the 32nd consecutive month of annual growth, Zillow noted. That gives buyers more leverage.

The typical home took 25 days to draw an accepted offer, five days longer than last year, and 27.1% of sellers cut their asking price, Zillow said.

And, there still are roughly 18% fewer homes for sale than before the pandemic — part of a shortage of 4.7 million homes nationwide that keeps prices high and affordability stretched.

Still Forecasting Growth

Despite that, Zillow said it still forecasts home sales growing 1.2% in 2026, the best year since 2022.

Fisher said that’s still far from what would be considered a “healthy market,” adding that prices are expected to end about where they started, with rates easing only slowly to around 6.4% by year’s end.

For sellers, fading buyer urgency makes it more important than ever to price a home right from the start.

Although Fisher predicts mortgage rates to rise again before they fall, he still sees an opening for buyers willing to move while others hesitate.

“The best time to buy a home is when nobody else wants to,” he said. “Buyers who can make the math work have real negotiating leverage right now.”