Zillow started its July Market Report with good news: Year-over-year home sales increased by 7%. This is the highest annual gain so far in 2026.
Then the real estate technology company hit us with a sobering reality.
This gain represents sales that closed in July, so many of the offers were actually made in June — before the U.S. officially ended the ceasefire with Iran.
That timing makes all the difference. July home sales data were strong, but Zillow analysts believe this is as good as it gets in 2026.
Unfortunately, it might all be downhill from here.
Newly pending listings decreased in July
July’s strong sales figures reflect June buyer activity, but lagging sales representation isn’t the only reason Zillow analysts remain cautious.
Some of the other data points from Zillow’s July report also give the company pause. Specifically, it flagged data about newly pending listings, or homes that have received an offer but haven’t closed yet.
“Newly pending listings” from July will likely translate to “home sales” in August. Year-over-year newly pending listings increased by only 0.3% in July — and they’ve dropped 7.7% since June.
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This shift makes sense, given that Freddie Mac mortgage rates ticked down a couple of times in June, then spiked in July. On July 30, the 30-year fixed rate reached an annual high of 6.66%.
Increasing interest rates probably deterred more people from making offers on homes in July.
“This portends a weaker half of the year for sales growth, with flat to declining transaction volumes for the remainder of the year in some regions,” wrote Mischa Fisher, chief economist for Zillow Group.
Mortgage rates could continue hurting the housing market
Things quickly worsened in August, lending Zillow’s predictions of a weaker housing market even more credibility.
On Aug. 6, the average 30-year mortgage rate had increased again to 6.69%. This could sideline even more potential homebuyers.
I reached out to Zillow to ask whether there is a scenario in which the housing market could improve this year. What would it take for Zillow to reverse its grim outlook for 2026 real estate?
“Elevated borrowing costs are in part due to elevated inflation,” Kara Ng, senior economist at Zillow, told TheStreet. “Earlier this year, before the oil shock, mortgage rates briefly touched 6% and we saw real buyer activity pick up in response.”
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“A reversal of the oil price shock could put buyers back in the position they were in earlier this year, when the typical household had an extra $30,000 in buying power compared to the year before,” Ng continued.
For oil prices — and mortgage rates — to drop significantly, the U.S. would have to improve its relations with Iran.
The two countries are discussing the possibility of reopening the Strait of Hormuz, but it’s a constant back-and-forth. The deal is far from finalized. However, that would likely be the first step to lower home loan rates.
Zillow’s tips for homebuyers and sellers in this market
Today’s high housing costs make it a tough time for many to buy a house. It isn’t exactly easy for sellers, either — less buyer demand means fewer people interested in buying their homes.
If you can still afford to buy a home, though, the current real estate market could actually be great for you.
“One of the best times to buy is when nobody else wants to,” Ng told TheStreet. “Right now, fewer buyers are able to compete, which means more leverage for the ones who can.”
“The trade-off for waiting until the 2027 shopping season is fresher options but also potentially fresh competition,” she added.
As for home sellers, the key to getting a good offer is to be realistic. Sellers are dealing with the double whammy of an already-slow market and the end of the home-buying season.
“As home shopping season winds down, the pool of active buyers gets smaller, which makes pricing right even more important,” Ng said. “A well-priced home can still generate real competition, but there is less room for error than there was a few months ago.”
Working with a real estate agent who knows your local market well is key to selling your home in today’s housing environment.
A good Realtor can help you set an appropriate price so the house will ideally sell quickly. And they can help you understand what to expect from the process.
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