Pending home sales are down
Pending-home sales returned to negative territory in June after a surprise uptick in May that broke a six-month streak of monthly declines, the National Association of REALTORS® reported, citing its Pending Home Sales Index.
Pending sales fell 8.6% compared to May and dropped 20% compared to June 2021. Pending sales, in which the contract has been signed but the transaction has not closed, are considered a leading indicator and generally precede existing-home sales by a month or two.
“Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date,” NAR chief economist Lawrence Yun said in a press release. “There are indications that mortgage rates may be topping or very close to a cyclical high in July. If so, pending contracts should also begin to stabilize.”
A home purchase in June cost about 80% more than it did in June 2019, NAR said, adding that almost one in four buyers who purchased a home three years ago couldn’t do so today because they no longer earn the qualifying income needed to purchase a median-priced home.
All four geographic regions saw decreases in contract activity from the previous month, led by the West, with a 15.9% drop, followed by the South, with an 8.9% decline, the Northeast, with a 6.7% slide, and the Midwest, with a 3.8% decrease.
Citing NAR’s latest projection, Yun expects home sales to close the year 13% lower. However, he noted, if mortgage rates stabilize near 6% and job creation remains steady, home sales could resume their ascent by early next year.
Pending-home sales fall to 10-year low
Pending-home sales fell for the sixth month in a row in April, hitting their slowest pace in almost a decade, as rising mortgage rates and home prices increased the cost of a home purchase by 40% from a year ago, the National Association of REALTORS® reported, citing its Pending Home Sales Index.
Pending sales, in which the contract has been signed but the transaction has not closed, are considered a leading indicator. They fell 3.9% on a monthly basis last month and 9.1% on an annual one, according to a press release.
Looking ahead, NAR chief economist Lawrence Yun expects existing-home sales to slide by 9% in 2022 and home-price appreciation to slow to 5% by the end of the year.
Higher mortgage rates have raised monthly mortgage payments by as much as $500. The increase, already a burden, can become even more of an issue when combined with rapid inflation, Yun said.
The slowdown in sales is being driven by more than rising costs, however, First American chief economist Mark Fleming said. Potential sellers are facing a “prisoner’s dilemma” from rising interest rates, which discourage homeowners from selling, he said.
“Higher mortgage rates leave existing homeowners feeling ‘rate locked-in’ to their existing homes, and existing homeowners are the largest source of buyers, so the greater the rate lock-in effect, the fewer homes for sale and fewer home sales,” Fleming explained. “This means house-price appreciation should moderate from its current record-setting pace. Mortgage rates between 5-6% and house-price appreciation below 10%, eventually, mean a potential return to a not-so-new normal.”
Despite the slowdown in demand, the market appears well-positioned to absorb the impact of rising rates, Keller Williams Chief Economist Ruben Gonzalez said.
“We expect to see inventory finally start to accumulate slowly toward more normal levels and away from the unprecedented lows of the last couple of years,” he said. “We will be keeping a close eye on how inventory is accumulating the rest of the year as an indicator of how the market is evolving.”
Three of the four geographic regions saw decreases in contract activity from the previous month, with only the Midwest seeing an increase, with a 6.6% rise. Sales fell 16.2% in the Northeast, 4.7% in the South and 4.3% in the West.
In the CNBC video below it states the pending home sales are down for the month of September 2021.
Pending home sales, which are a measure of signed contracts to buy existing homes, fell an unexpected 2.3% in September compared with August, according to the National Association of Realtors.
Well, it seems every day we get conflicting reports on the real estate market. Today, I’m hearing that pending home sales are down for the month of July 2021
Watch the video below:
Potential homebuyers may be hitting the limit of what they can afford. Pending home sales, a measure of signed contracts on existing homes, fell 2.2% in September compared with August, according to the National Association of Realtors.