Pending home sales dropped in July, reversing course on two consecutive months of gains, in accordance with the National Association of Realtors®. Of the four major regions, each reported a decline in contract activity, however the greatest decline came in the West.
Pending Home Sales Drop 2.5% in July
The Pending Home Sales Index, a forward-looking indicator determined by contract signings, decreased 2.5% to 105.6 in July, down from 108.3 in June. Year-over-year contract signings fell 0.3%, doing an about-face of the prior month’s increase.
“Super-low mortgage rates have not yet consistently pulled buyers back into the market,” said Lawrence Yun, NAR chief economist. “Economic uncertainty is no doubt holding back some potential demand, but what is desperately needed is more supply of moderately priced homes.”
Yun expects Gross Domestic Product (GDP) growth to ease to 2.0% in 2019 and 1.6% in 2020, but growth predictions are somewhat uncertain as a result of trade tensions. With slower economic growth, interest rates will continue to be low. Though home sales will receive a short-term boost from lower mortgage rates, existing-home sales will likely be flat at 5.34 million in 2019 given the level of sales in the first seven months of the year, he said. Amid tight inventory conditions, the median price of existing-home sales will continue increasing, but at a slower pace of 4% in 2019, to $269,000, and 3% in 2020, to $278,500.
Low inventory numbers impact the nation’s overall economy, according to Yun.
“A boost to home building would greatly improve economic growth,” he said. “More free-market prices on construction materials without government interference about where homebuilders have to get their supply will also help produce more and grow the economy. The housing industry cannot grow without more supply.”
July pending home sales regional breakdown
All regional indices are down from June. The PHSI in the Northeast fell 1.6% to 93.0 in July and is now 0.9% less than a year ago. In the Midwest, the index dropped 2.5% to 101.0 in July, 1.2% less than July 2018.
Pending home sales in the South decreased 2.4% to an index of 122.7 in July, however that number is 0.1% above last July. The index in the West declined 3.4% in July to 93.5 but still increased 0.3% above a year ago.
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