Pending homes sales in the United States stumbled in July for the fourth time in five months as only the West of the nation saw an increase in activity, according to the latest index.
The Pending home sales index published by the National Association of Realtors (NAR), a forward looking indicator based on contract signings, decreased 0.8% in July and is now 1.3% below a year ago. It has fallen on an annual basis in three of the past four months.
Lawrence Yun, NAR chief economist, said that staggering inventory woes throughout the country continue to stall contract activity. ‘With the exception of a minimal gain in the West, pending sales were weaker in most areas in July as house hunters saw limited options for sale and highly competitive market conditions,’ he pointed out.
‘The housing market remains stuck in a holding pattern with little signs of breaking through. The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace,’ he added.
According to Yun, in the past five years, the national median sales price has risen 38% while hourly earnings have increased less than a third of that by 12%. He explained that this is an unsustainable trend that is putting considerable pressure on affordability in some markets, especially for prospective first time buyers.
He also said that the trend is pricing out some households who would otherwise be looking to buy a home. However, despite this growing obstacle, data and feedback from real estate agents continues to confirm that the slowdown in existing sales since spring is the result of a supply problem and not one of diminished demand.
Buyer traffic continues to be higher than a year ago, the typical listing has gone under contract within a month since April, and inventory at the end of July was 9% lower than last July.
‘The reality, therefore, is that sales in coming months will not break out unless supply miraculously improves. This seems unlikely given the inadequate pace of housing starts in recent months and the lack of interest from real estate investors looking to sell,’ Yun added.
With autumn at the doorstep, Yun expects existing home sales to close out the year at around 5.49 million, which is only an increase of 0.7% from 2016. The national median existing home price this year is expected to increase around 5%. In 2016, existing sales increased 3.8% and prices rose 5.1%.
‘The combination of weaker contract signings and the expected pause in activity in the Houston region because of Hurricane Harvey will likely slow overall sales growth in coming months,’ Yun pointed out.
A breakdown of the figures shows that the index fell by 0.3% in the Northeast but is still 2.4% above a year ago. In the Midwest it fell by 0.7% and is now 2.8% lower than July 2016.
Pending home sales in the South were down by 1.7% and are now 0.2% below last July while in the West they were up by 0.6% but are still 4% below a year ago.