Pending Home Sales Stop Three-Month Skid

After declining three straight months, pending home sales reversed course in June as most markets saw an increase in contract activity, the National Association of Realtors reported yesterday.

The Pending Home Sales Index, based on contract signings, rose by 1.5 percent to 110.2 in June from an upwardly revised 108.6 in May. At 0.5 percent, the index last month increased annually for the first time since March.

Pending home sales in the South rose by 2.1 percent to 126.0 in June and improved by 2.6 percent from a year ago. The index in the West grew by 2.9 percent in June to 101.5, but remained 1.1 percent below a year ago. The Northeast inched forward by 0.7 percent to 98.0 in June and by 2.9 percent from a year ago. Only the Midwest saw a decline, falling by 0.5 percent to 104.0 in June and by 3.4 percent from a year ago.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said June pending home sales “surpassed expectations” following several months of disappointing results.

“Interest in buying a home is clearly increasing,” Vitner said. “Unfortunately, low inventories are keeping many potential buyers and sellers on the sidelines, as many would-be trade-up buyers are reluctant to put their home up for sale until they find another home.”

Vitner noted mortgage applications to purchase a home inched higher in July while rates moved down. “The trend in purchase applications shows more consistent improvement than pending sales,” he said.

NAR Chief Economist Lawrence Yun said the bounceback in pending sales in most of the country in June is a “welcoming sign.”

“The first half of 2017 ended with a nearly identical number of contract signings as one year ago, even as the economy added 2.2 million net new jobs,” Yun said. “Market conditions in many areas continue to be fast-paced, with few properties to choose from, which is forcing buyers to act almost immediately on an available home that fits their criteria.”

Yun agreed supply is an ongoing issue holding back activity. “Housing inventory declined last month and is a staggering 7.1 percent lower than a year ago,” he said.