Pending home sales stalled in July, down 0.8 percent in the National Association of REALTORS® (NAR) Pending Home Sales Index (PHSI). The PHSI posted 109.1 in July, down from 110.0 in June. The Index is based on contract signings.
“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,” says Lawrence Yun, chief economist at NAR. “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.”
Only one of the four major regions in the U.S saw an increase in the PHSI in July, with the West up 0.6 percent to 102.3. The Midwest, Northeast and South saw decreases, with the Midwest down 0.7 percent to 103.3, the Northeast down 0.3 percent to 97.7, and the South down 1.7 percent to 123.1.
Home prices have outperformed incomes by a gaping margin in recent years, which is shutting out many would-be homebuyers—but the more pressing issue is the lack of supply, according to Yun.
“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 9.0 percent lower than last July,” Yun says. “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.”
“Pending home sales slipped in July from last month and from one year ago, signifying continued weakness on the horizon for home sales,” says Danielle Hale, chief economist at realtor.com®. “With inventory challenges intensifying in 2017, pending home sales have essentially topped out. The data shows that homes continue to go under contract quickly, suggesting that buyers are interested, but there simply are not enough homes on the market to keep the overall pace growing month-to-month with little relief on the horizon from new construction or investors selling off rental properties.”
Yun expects sales to stumble in the months ahead, partly due to Hurricane Harvey, which has ravaged the fourth-most populous city in the nation.
“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,” says Yun.
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