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By Kristin Myers, Editor-in-Chief

What's Happening Today

Falling homebuilder confidence could mean if you're in the market for a new home, you may see lower prices. It probably won't come as a surprise to you or anyone else that the housing market is starting to take a hit from high home prices and rising mortgage rates. As affording a home gets more out of reach and buyers lose interest in purchasing, homebuilder confidence is starting to plummet, according to the latest NAHB/Wells Fargo Housing Index released this morning.

The index fell more than expected to its lowest levels since the start of the COVID-19 pandemic, tumbling to a reading of 55 in July from 67 in June. For reference, at this time last year sentiment stood at an 80. So while any reading above 50 indicates builders think conditions are favorable, confidence is clearly waning in this seventh straight month of declines.

This increasing pessimism could mean good news if you're interested in buying a house. We could see prices fall in the near future, as 13% of builders in the HMI survey said they had reduced home prices in the past month to boost sales or limit cancellations. A Redfin analysis last week found that 15% of homebuyers backed out of purchases in June—the highest rate since the start of the pandemic, when home sales cancellations soared over 17%.

- Kristin

Editors' Picks

Housing Boom Fades World-Wide as Interest Rates Climb (The Wall Street Journal)

How Much House Can You Afford? (The Balance)

Morgan Stanley, Goldman Say Stocks Have Yet to Find a Bottom (Bloomberg)

What Is a Stock Bottom? (The Balance)

Diverging Jobs Data Raise Questions About Labor Market Health (The Wall Street Journal)

Airfares are Finally Starting to Cool as Peak Summer Travel Season Fades. Now What? (CNBC)

Everything You Need to Know About Building Credit (The Balance)

I Want To Get a Credit Card. How Do I Choose? (The Balance)

Term of the Day

Escrow

If you're purchasing or selling real estate, you'll likely hear about escrow—an arrangement commonly used to manage funds after an offer has been accepted on a home sale.

In short, escrow is an arrangement between two parties in which funds or property are managed by a neutral third party that keeps those funds or property safe and manages how and when they are disbursed.

Escrow can be used for other transactions besides the sale of real estate. However, in real estate, escrow is most commonly used to manage related transactions, including earnest money deposits before a sale closes, the distribution of funds at the sale's closing, and the funds and payments needed for property taxes and insurance after the sale.

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Off the Charts

Did you know that interest rates are set partly based on your riskiness as a borrower? The riskier you are to a lender, the higher your interest rates will be. Mortgage lenders typically use credit scores to determine whether you qualify for the mortgage and to determine risk and the likelihood that you will default on your mortgage loan. The higher your credit score, the lower the risk that you'll default on your loan, and the lower the interest rate you'll qualify for.