US pending home sales fall 1.8%

The number of contracts signed to buy previously-owned homes fell in June but remained near May’s nine-year high, the National Association of Realtors said Wednesday. Economists had expected a 1.0% increase, but NAR’s index hit a more-than-9-year high in May, so a slight pullback isn’t too concerning.

The pullback in pending home sales in June reflected weakness in the Midwest and South, with pending sales falling by 3.0 percent in both regions.

NAR still sees strong nationwide support for housing, with demand robust and more homeowners finally regaining enough equity in their homes to think about moving on.

For the first time in 2015, pending home sales declined in June, slowing momentum in the height of the homebuying summer season.

Pending home contracts become sales after a month or two, and last month’s drop pointed to a pause in home resales after they reached a near 9-year high in May.

“Competition for existing houses on the market remained stiff last month, as low inventories in many markets reduced choices and pushed prices above a few buyers’ comfort level”, he said.

As of June, pending sales had increased for ten consecutive months, year-over-year, reported by NAR. “A combination of homebuilders ramping up construction and even more homeowners listing their properties on the market is needed to tame price growth and give all buyers more options”.

The economy has added about 1.3 million jobs in 2015, while the unemployment rate, at 5.3 percent, is the lowest since 2008. However, in the Midwest the index declined 3 percent to 108.1 in June, but is still 5 percent above June 2014. Sales rose 0.5% in the West to an index score of 104.4, up 10.4% over a year ago.

Overall, total existing-home sales this year are forecast to increase 6.6 percent to around 5.27 million, about 25 percent below the prior peak set in 2005 when sales eclipsed 7 million.

Purchases of new U.S. homes fell 6.8 percent to a 482,000 annualized pace in June – the weakest since November, Commerce Department figures showed last week. A lag of a month or two usually exists between a contract and a completed sale. A reading of 100 corresponds with the average level of contract activity in 2001, as mentioned by the NAR.