Pending home sales in the United States were mostly static in June but the latest index from the National Association of Realtors is now at its second highest reading over the last year.
However, supply and affordability constraints prevented a bigger boost in activity from mortgage rates that lingered near all-time lows through most of the month and increases in the Northeast and Midwest were offset by declines in the South and West.
Overall the NAR’s pending home sales index, a forward looking indicator based on contract signings, was up 0.2% month on month and is 1% higher than June 2015. But it is noticeably down from this year’s peak level in April.
According to Lawrence Yun, NAR chief economist, a solid bump in activity in the Northeast pulled up pending sales modestly in June. ‘With only the Northeast region having an adequate supply of homes for sale, the reoccurring dilemma of strained supply causing a run-up in home prices continues to play out in several markets, leading to the last two months reflecting a slight, early summer cooldown after a very active spring,’ he said.
‘Unfortunately for prospective buyers trying to take advantage of exceptionally low mortgage rates, housing inventory at the end of last month was down almost 6% from a year ago and home prices are showing little evidence of slowing to a healthier pace that more closely mirrors wage and income growth,’ he pointed out.
‘Until inventory conditions markedly improve, far too many prospective buyers are likely to run into situations of either being priced out of the market or outbid on the very few properties available for sale,’ he added.
One noteworthy and positive development occurring in the housing market during the first half of the year, according to Yun, is that sales to investors have subsided from a high of 18% in February to a low of 11% in June, which is the smallest share since July 2009.
Yun attributes this retreat to the diminished number of distressed properties coming onto the market at any given time and the ascent in home prices, which have now risen year on year for 52 consecutive months.
‘Limited selection of homes at bargain prices is reducing the number of individual investors willing or able to buy. This will hopefully open the door for first-time buyers, who made some progress last month but are still buying homes at a subpar level even as rents increase at rates not seen since before the downturn,’ Yun explained.
In spite of the slight slowdown in contract signings from April’s peak high, existing home sales this year are still expected to be around 5.44 million, 3.6% higher from 2015 and the highest annual pace since 2006 when it was 6.48 million.
After accelerating to 6.8% a year ago, national median existing home price growth is forecast to slightly moderate to around 4%.
A breakdown of the figures show that in the Northeast the index was up 3.2% in June and is now 1.7% above a year ago. In the Midwest the index increased 0.8% and is now 1.6% higher than June 2015.
Pending home sales in the South decreased modestly by 0.6% in June but are still 1.8% higher than last June. The index in the West fell by 1.3% in June and is now 1.8% below a year ago.