Pending home sales drop most since early 2018
Contract signings to purchase previously owned homes fell in July by the most since early 2018, indicating a pause in buyer interest even against a backdrop of falling mortgage rates, a firm job market and steady income gains.
The National Association of Realtors' index of pending home sales decreased 2.5% from the previous month, data from the group showed. The median forecast in Bloomberg's survey called for no change. Compared with a year earlier, contract signings were up 1.7% on an unadjusted basis, the most since early 2017.
Even with the monthly decline, the index has steadily improved since the end of last year. The cheapest mortgage rates in nearly three years and a jobless rate hovering around five-decade lows hold the potential for further strength in coming months.
Recently released July data show contract closings on existing home purchases increased to the highest level since February, while starts of one-family dwellings were the strongest in six months.
Pending home sales are often considered a leading indicator of existing-home purchases and a measure of the health of the residential real estate market in coming months.
A separate report released Aug. 29 on gross domestic product showed housing construction contracted for a sixth-straight quarter. Residential investment shrank at a 2.9% pace in the second quarter that was initially reported as a 1.5% drop.
"Super-low mortgage rates have not yet consistently pulled buyers back into the market," Lawrence Yun, NAR's chief economist, said in a statement. "Economic uncertainty is no doubt holding back some potential demand, but what is desperately needed is more supply of moderately priced homes."
Signings decreased in all four regions, led by a 3.4% drop in the West. Pending sales in the South, the biggest region, decreased 2.4%.
Forecasts for monthly pending home sales in the Bloomberg survey of economists ranged from a 1% decline to a 1% advance.