Pending Home Sales Rise for 2nd Straight Month
Pending home sales rose for the second straight month in June, the National Association of Realtors reported yesterday.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose by2.8% to 108.3 in June, up from 105.4 in May. Year-over-year contract signings jumped by 1.6%, snapping a 17-month streak of annual decreases.
All four regions recorded a rise in contract activity, with the West experiencing the highest surge, jumping by 5.4% in June to 96.8; from a year ago, West pending sales increased by 2.5%.
In the South, pending sales increased by 1.3% to 125.7 in June and improved by 1.4% from a year ago. In the Northeast, pending home sales rose by 2.7% to 94.5 in June and rose by 0.9% higher from a year ago. In the Midwest, the index rose by 3.3% to 103.6 in June and improved by 1.7% from a year ago.
“June’s pending home sales data showed encouraging growth, said Joel Kan, Associate Vice President of Industry and Economic Forecasting with the Mortgage Bankers Association. “Gains were seen in all regions, as buyers were helped by improving affordability from moderating home-price growth and lower mortgage rates.”
Kan said the June increase was in line with the trend of continuing growth in purchase applications that MBA has seen for most of 2019. “However, recent months of home sales data have sometimes diverged from other housing indicators because there are more first-time home buyers entering the market at a time when all-cash sales are declining,” he said. “For the mortgage industry, this means a larger share of overall home purchases are now being financed with a mortgage.”
Kan added thehe non-seasonally adjusted data still showed some year-over-year declines, “but this may improve if we see housing inventory continue to grow, both from new construction and more homeowners deciding to sell.”
NAR Chief Economist Lawrence Yun attributed the increase in pending sales to current favorable conditions and predicted the rise is likely the start of a positive trend for home sales.
“Job growth is doing well, the stock market is near an all-time high and home values are consistently increasing,” Yun said. “When you combine that with the incredibly low mortgage rates, it is not surprising to now see two straight months of increases.”
Yun said June’s contract signings indicate buyers are both enthusiastic about the market and of the potential wealth gain, but he added that home builders need to increase inventory. “Homes are selling at a breakneck pace, in less than a month, on average, for existing homes and three months for newly constructed homes,” he said. “Furthermore, homeowners’ equity in real estate has doubled over the past six years to now nearly $16 trillion. But the number of potential buyers exceeds the number of homes available. We need to see sizable growth in inventory, particularly of entry-level homes, to assure wider access to homeownership.”
