Mortgage rates are falling, but there are 3 reasons buyers are still on the sidelines

• Mortgage rates have fallen to their lowest in 15 months, but buyers haven't flocked to the market.
• Pending home sales fell 6.9% in the last four weeks, the biggest annual decline in almost a year.

Mortgage rates are falling, but buyers aren't jumping back into the market yet as they wait to see how new rules on agent fees will play out, and if rates and prices drop further, Redfin says.

Last week's 30-year fixed rate fell to just under 6.5 percent, its lowest since April 2023 according to data from Freddie Mac.

But pending sales remain low, falling 6.9% in the last four weeks in their biggest annual decline in almost a year, according to Redfin.

Redfin says there's a combination of factors limiting homebuyers from acting on the low rates.

First, buyers are waiting to see how a new National Association of Realtors settlement will affect the buying process. The NAR settlement introduced a new set of rules this month that's changed the way real estate agents are paid.

The rules are meant to stop buyers and sellers from having to pay steep commissions to their agents, but buyers will now be frequently asked to sign a buyer-representation agreement before seeing any homes with an agent. That makes the agent's fees more transparent, but could make hesitant homebuyers even less likely to pull the trigger as they weigh agent fees upfront.

Jason Aleem, Redfin's chief of real estate services, says the rule actually doesn't require signing the agreement just to tour a home, but some buyers "have likely been scared off" by misinformation around the rule.

"I expect more buyers and sellers to jump into the market in a few months, once everyone has a better understanding of how the new NAR rules will play out in actual real-estate deals," Fernanda Kriese, a Redfin agent in Las Vegas, said in a press release.

The second reason buyers might be hesitant to resume their house hunt is that many are likely waiting to see if mortgage rates and prices fall further. With the Federal Reserve's interest rate cut expected for September, borrowing costs on everything from mortgages to auto loans to credit cards could soon be lower.

Investors are pricing in a 25 basis point rate cut at next month's Federal Open Market Committee meeting, according to the CME FedWatch tool.

Buyers are also stuck in a waiting game for lower prices, holding off to see if nearly record-high home costs will fall. Home sale prices hit a record in June of $442,389, and dropped only slightly to $439,170 in July.

Yet, buyers may not realize that a rate cut could end up boosting housing demand (and thus, home prices) in the short term.

Finally, prospective buyers are also likely weighing political uncertainty, and believe that a particular candidate winning in November could potentially influence the market.

"The election and the drop in mortgage rates are also delaying buyers; a lot of them are waiting on the sidelines until November, hoping to get a lower rate and maybe more homes to choose from," Kriese said.