Pending Home Sales Rise, Remain Sluggish
Pending home sales showed signs of life in June, but continued to lag from a year ago, the National Association of Realtors reported yesterday.
NAR said its Pending Home Sales Index, a forward-looking indicator based on contract signings, rose by 0.9 percent to 106.9 in June from 105.9 in May. Despite last month’s increase, contract signings fell 2.5 percent on an annual basis, the sixth consecutive annual decline.
All four regions saw increases. In the Northeast, pending home sales rose by 1.4 percent to 93.7 in June, but fell by 4.1 percent from a year ago. In the Midwest, the index rose by 0.5 percent to 101.9, but fell by 2.1 percent from a year ago. The South saw a 1.1 percent increase to 124.2 in June but fell by 0.3 percent from a year ago. In the West, the index rose by 0.7 percent to 95.4 but fell by 5.6 percent from a year ago.
“Pending home sales tend to lead existing home sales by one to two months, so June’s improvement bodes well for existing home sales, which measure closings, in July and August,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Affordability concerns have clearly cooled buyer interest but may be bringing out more sellers. Tax law changes may be contributing to rising inventories of higher-priced homes in some areas.”
NAR Chief Economist Lawrence Yun said an uptick in existing inventory helped lift contract signings in June.
“After two straight months of pending sales declines, home shoppers in a majority of markets had a little more success finding a home to buy last month,” Yun said. “The positive forces of faster economic growth and steady hiring are being met by the negative forces of higher home prices and mortgage rates. Even with slightly more homeowners putting their home on the market, inventory is still subpar and not meeting demand. As a result, affordability constraints are pricing out some would-be buyers and keeping overall sales activity below last year’s pace.”
Yun added “it is possible” the worst of the supply crunch affecting most of the country has passed. NAR reported existing inventory rose on an annual basis in June for the first time in three years. “Home price growth remains swift and listings are still going under contract at a robust pace in most of the country, which indicates that even with rising inventory in many markets, demand still significantly outpaces what’s available for sale,” he said. “However, if this trend of increasing supply continues in the months ahead, prospective buyers will hopefully begin to see more choices and softer price growth.”
