The Pending Home Sales Index fell 0.7% to 106.2 in July from 107.0 in June, the seventh straight month the index has declined, according to the National Association of Realtors®. With last month’s decline, contract signings are now down 2.3% year-over-year.
The PHSI in the Northeast climbed 1.0% to 94.6 in July, but is still 2.3% below a year ago. In the Midwest the index inched up 0.3% to 102.2 in July, but is still 1.5 % lower than July 2017. Pending home sales in the South declined 1.7% to an index of 122.1 in July, and are 0.9% below a year ago. The index in the West decreased 0.9% in July to 94.7, and is 5.8% below a year ago.
Lawrence Yun, NAR chief economist, says the housing market’s summer slowdown continued in July. “Contract signings inched backward once again last month, as declines in the South and West weighed down on overall activity,” he said. “It’s evident in recent months that many of the most overheated real estate markets – especially those out West – are starting to see a slight decline in home sales and slower price growth.”
Added Yun, “The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.”
Pointing to annual changes in active listings data at realtor.com®, Yun said increasing inventory in several large metro areas, and especially many out West, will likely help cool price growth to more affordable levels going forward. Even as days on market remains swift in many of these areas, Denver, Santa Rosa, California, San Jose-Sunnyvale-Santa Clara, California, Seattle, Nashville, Tennessee, and Portland, Oregon were among the large markets seeing a rise in active listings in July compared to a year ago.
Earlier this week, NAR released commentary reflecting on the past decade since the beginning of the Great Recession. Although supply and affordability headwinds are the biggest issue right now, Yun said it is important to note just how much the housing market has recovered since the depths of the financial crisis. Today, thanks to several years of solid job growth, as well as safe lending and regulatory policy reforms, foreclosures sit near historic lows and record high home values have helped millions of households build substantial wealth.
“Rising inventory levels – especially if new home construction finally starts picking up – should help slow price appreciation to around 2% to 4%, which will help aspiring first-time buyers, and be good for the long-term health of the nation’s housing market,” said Yun.
Yun expects existing-home sales this year to decrease 1.0 % to 5.46 million, and the national median existing-home price to increase around 5.0%. Looking ahead to next year, existing sales are forecast to increase 2% and home prices around 3.5%.
