After reports of improving sales for new and existing homes in July, pending home sales during the month disappointed analysts by falling 5.5% month over month, according to the National Association of Realtors (NAR).
The news put a damper on expectations that home sales may have turned a corner in light of home loan interest rates falling and evidence that some homebuyers were beginning to test the market.
“A sales recovery did not occur in midsummer,” said NAR Chief Economist Lawrence Yun. “The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election.”
NAR’s Pending Home Sales Index (PHSI), which is a leading forward-looking indicator for the housing sector, reached a low of 70.2 in July. The figure was 29.8 points below 100, which is equal to the level of contract activity in 2001, the year the index first started tracking pending home sales. Year-over-year, pending transactions were down 8.5%.
Contract signings month over month declined in all four U.S. regions in July, led by the Midwest which saw its PHSI fall 7.8% for the month and 11.4% from a year earlier. The South’s index slid 6.5% in July and 11.5% year over year. In the West, the PHSI dropped 3.8%, down 6.0% from the year before. The best-performing region was the Northeast, where the PHSI skidded a mere 1.4% from the previous month. The region was alone in experiencing an increase of 2.4% from the previous July.
“In terms of home sales and prices, the New England region has performed relatively better than other regions in recent months,” Yun said. “Current lower, falling mortgage rates will no doubt bring buyers into the market.”
The PHSI is based on a sampling of multiple listing service data for the pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
