Pending Home Sales Stumble Again

Pending home sales stumbled again in July, the fourth decline in the past five months, the National Association of Realtors said yesterday.

NAR said its monthly Pending Home Sales Index fell by 0.8 percent to 109.1 in July from a downwardly revised 110.0 in June. The index is 1.3 percent below a year ago and has fallen on an annual basis in three of the past four months.

Only the West region saw any improvement in July, with pending sales increasing by 0.6 percent in July to 102.3, but fell by 4.0 percent from a year ago. Sales in the largest region, the South, fell by 1.7 percent to 123.1 in July and by 0.2 percent from a year ago. Sales in the Northeast fell by 0.3 percent in July to 97.7 but improved by 2.4 percent from a year ago. Sales in the Midwest decreased by 0.7 percent to 103.3 in July and by nearly 3 percent from a year ago.

NAR Chief Economist Lawrence Yun attributed “staggering inventory woes” to stalled contract activity.

“The housing market remains stuck in a holding pattern with little signs of breaking through,” Yun said. “The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace.”

Yun said data and feedback continue to confirm the slowdown in existing sales since spring is the result of a supply problem and not one of diminished demand. “Buyer traffic continues to be higher than a year ago, the typical listing has gone under contract within a month since April and inventory at the end of July was 9.0 percent lower than last July,” he said. “The reality, therefore, is that sales in coming months will not break out unless supply miraculously improves. This seems unlikely given the inadequate pace of housing starts in recent months and the lack of interest from real estate investors looking to sell.”

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said July’s “underwhelming” pending home sales report suggests existing home sales will remain sluggish going into the fall.

“The housing market remains extremely competitive as demand continues to grow at a pace that new listings cannot satisfy,” Vitner said. “Inventory is currently 9.0 percent lower than this time last year.”

Vitner added the flooding in Houston resulting from Hurricane Harvey will likely depress home sales in coming months. “Texas accounts for 9.5 percent of the nation’s existing home sales, with the greater Houston area accounting for around one quarter of that,” he said.