Pending home sales on upward trend
WASHINGTON — Pending home sales expanded in most of the country in July and reached their second highest reading in over a decade, according to the National Association of Realtors. Only the Midwest saw a dip in contract activity last month.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 1.3 percent to 111.3 in July from a downwardly revised 109.9 in June. It is now 1.4 percent higher than the 109.8 in July of last year.
Lawrence Yun, the association’s chief economist, said a sizable jump in the West lifted pending home sales higher in July. “Amidst tight inventory conditions that have lingered the entire summer, contract activity last month was able to pick up at least modestly in a majority of areas,” he said. “More home shoppers having success is good news for the housing market heading into the fall, but buyers still have few choices and little time before deciding to make an offer on a home available for sale. There’s little doubt there’d be more sales activity right now if there were more affordable listings on the market.”
“The index in the West last month was the highest in over three years 1 largely because of stronger labor market conditions,” Yun said. “If homebuilding increases in the region to tame price growth and alleviate the ongoing affordability concerns, the healthy rate of job gains should support more sales.”
Recent residential construction data shows that the size and costs of new homes has moved downward over the past year. According to Yun, this is an early indication that homebuilders are beginning to shift away from building larger, more expensive homes for the upper end of the market to focusing more on properties geared for buyers in the middle and lower price tiers.
Agents in several high-cost areas have been saying for quite a while that there is robust demand for single-family starter homes and townhomes at an affordable price point for young buyers, he said.
“The homeownership rate won’t move up from its over 50-year low without a meaningful boost from first-time buyers, whose participation has yet to noticeably increase so far this year despite mortgage rates near all-time lows ,” Yun said.
Existing-home sales this year are forecast to be around 5.38 million, a 2.8 percent increase from 2015 and the highest annual pace since 2006’s 6.48 million.
National median exisiting-home-price growth is forecast to fall to around 4 percent, after accelerating to 6.8 percent a year ago.
The Pending Homes Sale Index for the Northeast moved up 0.8 percent in July. It is now 1.1 percent above July 2015.
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