The number of homebuyers searching for their piece of paradise fell to its lowest level on record in July, according to an Aug. 13 Redfin report.
Nationwide, there were an estimated 966,752 buyers in the market, down 2.5% from the month before.
Homebuying demand fell largely because mortgage rates soared to their highest level in a year, straining affordability. Freddie Mac’s 30-year fixed-rate mortgage rate averaged 6.59% for the month of July. This week the average rate was 6.65%.
Widespread economic and geopolitical uncertainty also deterred house hunters, according to Redfin’s report.
I believe high home prices are another big factor pushing away certain buyers.
There were an estimated 1,462,921 home-sellers in July in the U.S. That’s more than 496,000 more sellers than homebuyers (or 51.3%). When sellers outnumber buyers, buyers typically have more negotiating power because they have options, according to the report. That’s why a market with a lot more sellers than buyers is often called a buyer’s market.
In the Anaheim metro area, there are 35% more sellers than buyers (7,424 vs 5,488), the Los Angeles area had 62% more sellers than buyers (22,731 vs 14,055). In Riverside it’s worse, with 69% more sellers than buyers (18,767 vs 11,136), and San Diego had 30% more home sellers (18,767 vs 11,136)
“Buyers are dropping out faster than sellers, giving the buyers who remain more options and more negotiating power,” said Asad Khan, a senior economist at Redfin. “At the same time, uncertainty around whether the Fed will hike rates — and this summer’s rising mortgage rates — are keeping many would-be buyers on the sidelines.”
How firm are prices?
Redfin separately reported that U.S. home prices were basically flat, rising just 0.27% from June to July.
“Despite the sluggishness of the overall housing market, home-price growth is proving to be surprisingly resilient,” said Chen Zhao, head of economic research at Redfin. “That’s partly because today’s market is split in two: Many everyday buyers are constrained by affordability challenges, while wealthy buyers have the means to keep competing for desirable homes. The upper-end strength is helping prop up prices even as the broader market cools, giving buyers some bargaining power.”
As for pending home sales, the National Association of Realtors reported a 2.3% decline for July from June, which was 2.2% lower than July 2025. That’s in escrow, not yet closed sales.
“Mortgage applications tell a similar story. After improving earlier in the year, helped by higher incomes and slower house appreciation, but rising mortgage rates are paring back that progress,” said Sam Williamson, a senior economist at First American. “That keeps the market stuck in low gear as buyers and sellers wait for a better opening to make a move.”
How about some fun and not-so-fun facts?
— The U.S. recorded the highest debt in its history (and for any country) at $40 trillion. That’s $116,000 per person based on a population of about 350 million. To attract new Treasury bond investors, interest rates must go up, not down. That means mortgages, too.
— In Los Angeles, housing and childcare consume 97% of a typical working family’s income compared with 52% nationally, according to Redfin.
— Nearly 30% of homebuying partners say nothing has strained their relationship more than buying a home, according to a 2026 Clever survey of 1,000 people.
Buyer affordability by the numbers
Just 19% of California households could afford to buy the $916,750 median-priced single-family home in the second quarter of 2026, according to the California Association of Realtors. A minimum income of $228,400 is needed to qualify.
Orange County’s median priced home of $1,485,000 requires a $370,000 income, leaving just 14% of households that can afford the mortgage. Los Angeles County’s median price was $879,900, requiring a $159,600 income — just 17% of households can qualify.
Riverside County’s median price was $640,000, requiring $159,600 and 28% of households qualifying.
San Bernardino County’s median price was $500,000 requiring $124,400, with 34% of households qualifying.
San Diego’s median home price was $1,075,000 requiring income of $268,000; just 17% of households could afford that.
Buyer advice
“Interest rates aren’t coming down. This is a unique window for buyers to take their time and be more certain of decisions. You should have a 10-year ownership time horizon (keep the house 10 years or longer),” said Pat Veling, chief executive and president of Real Data Strategies Inc. “Prices may be adjusting downward. There are a lot of less experienced and weaker agents (accepting listings for overpriced properties). Homes priced right and marketed correctly are selling.”
Every purchase transaction I have done for clients this year had multiple offers.
If you are thinking about buying and are prepared to buy, now is a good time when fewer buyers are out there.
If you wait until the housing market gets better (lower rates and/or lower prices or maybe a change in the capital gains exemption), you will face fierce competition from other buyers who were also waiting for conditions to improve.
Better to deal with some buyer competition now instead of a flood of competing buyers.
As an aside, the Redfin methodology for calculating buyers is complicated. If you want to learn more about the methodology, email me or contact Redfin.
Freddie Mac rate update
The 30-year fixed rate averaged 6.65%, 2 basis points lower than last week. The 15-year fixed rate averaged 5.95%, 1 basis point lower than last week.
The Mortgage Bankers Association reported a .4% mortgage application decrease compared with one week ago.
Bottom line: Assuming a borrower gets an average 30-year fixed rate on a conforming $832,750 loan, last year’s payment was $39 less than this week’s payment of $5,346.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.875 %, a 15-year conventional at 5.75 %, a 30-year conventional at 6.375%, a 15-year conventional high balance at 5.99% ($832,751 to $1,249,125 in LA and OC and $832,751 to $1,104,000 in San Diego), a 30-year high balance conventional at 6.5% and a jumbo 30-year-fixed at 6.25%.
Eye-catcher loan program of the week: A 30-year mortgage, 30% down, 5.5% for the first five years payments, and 1 point cost.
Jeff Lazerson, president of Mortgage Grader, can be reached at 949-322-8640 or jlazerson@mortgagegrader.com.