More Americans sign deals to buy homes

More Americans signed contracts to purchase homes in July, a sign that demand for home ownership remains strong despite a shortage of listings on the market. The Pending Home Sales Index reached its second-highest level of the year, but it has not yet reached the sky-high mark of 115.0 in April. 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.

Regional Breakdown The PHSI in the Northeast moved up 0.8 percent to 96.8 in July, and is now 1.1 percent above a year ago.

“The index in the West last month was the highest in over three years 1 largely because of stronger labor market conditions”, Mr. Yun added.

An index of 100 is equal to the average level of contract activity during 2001, the first year to be analyzed. Pending sales are based on signed contracts, and are a good indicator of future closings.

In Southwest Florida, pending sales have been declining, with Realtors citing tight inventory as the primary culprit.

A sizable jump in the West lifted pending home sales higher. Manatee County had 533 combined pending sales in July, down 12 percent from July 2015.

Completed sales of homes fell 3.2 percent in July to a seasonally adjusted annual rate of 5.39 million, the Realtors reported last week.

Demand for housing is being driven by the labour market, which is steadily generating steady increases in wages as it nears full employment. Without sufficient equity in their current homes, many of these owners would be unable to generate a down payment for another home with the proceeds from a sale.

Even so, the USA homeownership rate fell to the lowest level in more than 50 years in the second quarter of 2016, a reflection of the lingering effects of the housing bust, financial hurdles to buying and shifting demographics across the country. Existing homebuyers often sell their house in order to finance the purchase of another property, which keeps inventory levels stable.

“More home shoppers having success is good news for the housing market heading into the fall”, Yun said. Low mortgage rates and continuing job creation may be luring more would-be buyers into the market. NAR is projecting that sales will total 5.38 million in 2016, up 2.8 percent from 2015 and the highest annual pace since 2006.