Pending home sales draw back in July
The rate of pending home sales continued to slip in July, with these transactions dropping from the previous year for three of the past four months.
The Pending Home Sales Index, an indicator of real estate contract signings maintained by the National Association of Realtors, fell to 109.1 in July. This was down 0.8 percent from a downwardly revised figure of 110 and 1.3 percent from July 2016.
The index is a measure of transactions where a contract has been signed but not yet closed, an action which typically takes place within one or two months. A Pending Home Sales Index of 100 is equal to the average contract activity in 2001, which had an existing home sales rate of 5 million to 5.5 million; this level is considered normal for the current population of the United States.
The Northeast and the West were the only one of four geographical regions identified by the National Association of Realtors to have some growth in pending sales. The index in this the West stood at 102.3, a 0.6 percent increase from the previous month but a 4 percent decrease from the previous year. In the Northeast, the Pending Home Sales Index of 97.7 was down 0.3 percent from June, but up 2.4 percent from July 2016.
The index in the Midwest fell 0.7 percent from the previous month and 2.8 percent from the previous year to 103.3. The figure was down 1.7 percent from June and 0.2 percent from July 2016 to 123.1 in the South.
Lawrence Yun, chief economist of the National Association of Realtors, said buyers in a number of markets have been facing pressures such as higher prices, increased competition, and affordability issues. Yun said the median sales price for a U.S. home has outpaced wage growth, with home prices growing 38 percent in the past five years while median hourly earnings have only gone up by 12 percent.
These difficulties can price certain buyers out of the market, particularly those who are looking for an affordable property as their first home purchase. Yun said that feedback from Realtors indicates that there has been a strong interest in homeownership, but that the supply of homes for sale is often not enough to meet buyers' needs.
"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 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."
Yun also said he anticipates that contract signings will further decrease in the South due to flooding and property damage in Texas caused by Hurricane Harvey.
Despite these pressures, Yun is also predicting a slight increase in existing home sales. He predicts that these sales will total approximately 5.49 million in 2017, which would be a 0.7 percent increase from 2016, and that the national median home price for the year will grow by 5 percent.
This would continue the pace of price increases from 2016, but mark a significant decrease in the growth of existing home sales. The year-over-year increase in existing home sales in 2016 was 3.8 percent, while median home prices were up 5.1 percent.
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