Pending home sales fell in July in the United States, reversing two consecutive months of gains, according to the latest index from real estate agents.
All of the four major regions covered by the index from the National Association of Realtors reported a drop in contract activity, although the greatest decline was in the West.
Overall, the pending home sales index, a forward-looking indicator based on contract signings, decreased 2.5% to 105.6 in July, down from 108.3 in June. Year on year contract signings fell 0.3%, doing an about face of the prior month’s increase.
‘Super low mortgage rates have not yet consistently pulled buyers back into the market. Economic uncertainty is no doubt holding back some potential demand, but what is desperately needed is more supply of moderately priced homes,’ said Lawrence Yun, NAR chief economist.
Yun expects GDP growth to ease to 2% in 2019 and 1.6% in 2020, but growth predictions are somewhat uncertain due to trade tensions. With slower economic growth, interest rates will remain low.
He explained that although home sales will get a short term boost from lower mortgage rates, existing-home sales are likely to be flat at 5.34 million in 2019 given the level of sales in the first seven months of the year.
Amid tight inventory conditions, it is expected that the median price of existing-home sales will continue increasing, but at a slower pace of 4% in 2019, to $269,000, and 3% in 2020, to $278,500.
Low inventory numbers impact the nation’s overall economy, according to Yun. ‘A boost to home building would greatly improve economic growth. More free market prices on construction materials without government interference about where home builders have to get their supply will also help produce more and grow the economy. The housing industry cannot grow without more supply,’ he pointed out.
A breakdown of the figures how that sales in the Northeast fell 1.6% in July and are now 0.9% lower than a year ago. In the Midwest, the index dropped 2.5%, some 1.2% less than July 2018.
Pending home sales in the South decreased 2.4% but that is still 0.1% higher than last July. The index in the West declined 3.4% in July but is 0.3% above a year ago.