"Pending Home Sales Plunge to an All-Time Low"
Despite a moderate recovery in June, analysts had anticipated a continued increase in pending home sales in July. However, the National Association of Realtors (NAR) reported a significant 5.5% monthly drop in July, a stark contrast to the predicted 0.2% gain and down from June's 4.8% increase. Yearly, there was a 4.6% decrease, slightly better than the 7.8% drop in June but still falling short of the forecasted 2.0% decline.
This significant decrease led to a new record low in the Pending Home Sales Index, which fell to 70.2%.
"Midsummer did not witness a sales recovery. The positive effects of job growth and increased inventory were unable to counter affordability challenges and the uncertainty surrounding the upcoming U.S. presidential election," stated Lawrence Yun, NAR's Chief Economist.
Sales fell across all four U.S. regions, with the Midwest and South experiencing the most significant declines. The Northeast saw the smallest decrease last month, and Yun noted that the New England region has recently outperformed other areas.
The Northeast's Pending Home Sales Index (PHSI) fell 1.4% from the previous month to 64.6, a 2.4% increase from July 2023. The Midwest index declined 7.8% to 67.8 in July, a 11.4% decrease from a year ago.
The South's PHSI dropped 6.5% to 83.5 in July, a 11.5% decrease from the previous year. The West index fell 3.8% in July to 56.2, a 6.0% decrease from July 2023.
"The New England region has performed relatively better than other regions in terms of home sales and prices in recent months," Yun added. "The current lower, falling mortgage rates will undoubtedly attract buyers to the market."
The market for previously owned homes has been stifled by high borrowing costs and a collapsing inventory for nearly two years. While mortgage rates have dropped to their lowest in over a year this month, high prices and limited inventory are discouraging potential buyers who might be waiting for even lower rates.
"Falling mortgage rates will undoubtedly attract buyers to the market," Yun said, although the modestly lower rates have yet to translate into increased buying.
The rate on a 30-year fixed mortgage is now below 6.5% following recent comments from Jerome Powell, who stated last week that "the time has come" for the central bank to cut interest rates.
Lower borrowing costs could help alleviate one of the least affordable housing markets in history. An index of U.S. home prices by S&P CoreLogic Case-Shiller reached a new record on Tuesday, with prices rising 5.4% in the year through June.
Pending-sales figures are typically a leading indicator of sales of previously owned homes, as houses usually go under contract a month or two before they are sold.
Bottom Line
The unexpected plunge in pending home sales to a record low is a clear indication of the challenges facing the housing market. High borrowing costs, limited inventory, and affordability issues are some of the major hurdles potential buyers are grappling with. Despite falling mortgage rates, there is still a lack of significant buying activity. What are your thoughts on this development? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.
"Pending Home Sales Plunge to an All-Time Low"
Despite a moderate recovery in June, analysts had anticipated a continued increase in pending home sales in July. However, the National Association of Realtors (NAR) reported a significant 5.5% monthly drop in July, a stark contrast to the predicted 0.2% gain and down from June's 4.8% increase. Yearly, there was a 4.6% decrease, slightly better than the 7.8% drop in June but still falling short of the forecasted 2.0% decline.
This significant decrease led to a new record low in the Pending Home Sales Index, which fell to 70.2%.
"Midsummer did not witness a sales recovery. The positive effects of job growth and increased inventory were unable to counter affordability challenges and the uncertainty surrounding the upcoming U.S. presidential election," stated Lawrence Yun, NAR's Chief Economist.
Sales fell across all four U.S. regions, with the Midwest and South experiencing the most significant declines. The Northeast saw the smallest decrease last month, and Yun noted that the New England region has recently outperformed other areas.
The Northeast's Pending Home Sales Index (PHSI) fell 1.4% from the previous month to 64.6, a 2.4% increase from July 2023. The Midwest index declined 7.8% to 67.8 in July, a 11.4% decrease from a year ago.
The South's PHSI dropped 6.5% to 83.5 in July, a 11.5% decrease from the previous year. The West index fell 3.8% in July to 56.2, a 6.0% decrease from July 2023.
"The New England region has performed relatively better than other regions in terms of home sales and prices in recent months," Yun added. "The current lower, falling mortgage rates will undoubtedly attract buyers to the market."
The market for previously owned homes has been stifled by high borrowing costs and a collapsing inventory for nearly two years. While mortgage rates have dropped to their lowest in over a year this month, high prices and limited inventory are discouraging potential buyers who might be waiting for even lower rates.
"Falling mortgage rates will undoubtedly attract buyers to the market," Yun said, although the modestly lower rates have yet to translate into increased buying.
The rate on a 30-year fixed mortgage is now below 6.5% following recent comments from Jerome Powell, who stated last week that "the time has come" for the central bank to cut interest rates.
Lower borrowing costs could help alleviate one of the least affordable housing markets in history. An index of U.S. home prices by S&P CoreLogic Case-Shiller reached a new record on Tuesday, with prices rising 5.4% in the year through June.
Pending-sales figures are typically a leading indicator of sales of previously owned homes, as houses usually go under contract a month or two before they are sold.
Bottom Line
The unexpected plunge in pending home sales to a record low is a clear indication of the challenges facing the housing market. High borrowing costs, limited inventory, and affordability issues are some of the major hurdles potential buyers are grappling with. Despite falling mortgage rates, there is still a lack of significant buying activity. What are your thoughts on this development? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.
