Following very strong gains in May, pending home sales fell back in June, on both a month-to-month and year-over-year basis. The National Association of Realtors’ Pending Home Sales Index fell to 112.8 in June, down 1.9% from May as well as 1.9% from June 2020.
“Pending sales have seesawed since January, indicating a turning point for the market,” says Lawrence Yun, NAR chief economist. “Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat.”
At the regional level, contract signings rose in the Northeast and Midwest compared with the prior month, but fell in the West and South. Only the Northeast PHSI rose on a year-over-year basis—up 0.5% to 98.5 from May to June and up 8.6% from June 2020.
The Midwest PHSI rose 0.6% to 108.3 last month, down 2.4% from one year ago. The South’s pending home sales fell 3% to 132.4, down 4.7% from one year ago, and the West’s PHSI fell 3.8% to 98.1, down 2.6% from one year ago.
“The moderate slowdown in sales is largely due to the huge spike in home prices,” Yun says. “The Midwest region offers the most affordable costs for a home, and hence that region has seen better sales activity compared to other areas in recent months.”
Yun anticipates that the 30-year fixed mortgage rate will rise to 3.3% by the end of the year and will average 3.6% throughout 2022. Given this rise in mortgage rates, he expects existing home sales to decline to 5.99 million in 2022, with price growth falling 4.4% to a median of $353,500.
“This rise will soften demand and cool price appreciation,” Yun says. “In just the last year, increasing home prices have translated into a substantial wealth gain of $45,000 for a typical homeowner. These gains are expected to moderate to around $10,000 to $20,000 over the next year.”
