Pending home sales increase by most in three months
Contract signings to purchase previously owned homes rose in June by the most in three months, indicating demand may pick up with the help of lower mortgage rates and steady job growth.
The index of pending home sales increased 2.8% from the previous month, exceeding the most optimistic forecast in a Bloomberg survey of economists, data out Tuesday from the National Association of Realtors in Washington showed. Still, contract signings were down 0.6% from June of last year on an unadjusted basis.
The gain in contract signings is a welcome sign for the housing market as it struggles to accelerate despite a recent dip in mortgage rates. Still, elevated prices and limited supply may constrain growth even as the Federal Reserve is expected to lower borrowing costs for the first time in a decade.
The report stands in contrast to recent data out over the last month pointing to weakness in the sector. Existing-home sales fell more than expected in June, while new-home sales missed estimates. At the same time, housing starts dropped to the slowest pace in three months as a decrease in apartment building outweighed a pickup in single-family projects.
Pending home sales are often looked to as a leading indicator of existing-home purchases and a measure of the health of the housing market in the coming months.
"Job growth is doing well, the stock market is near an all-time high and home values are consistently increasing," NAR Chief Economist Lawrence Yun said in a statement. "When you combine that with the incredibly low mortgage rates, it is not surprising to now see two straight months of increases."
Contract signings increased 5.4% from the prior month in the West, the most in three months; rose for a fourth month in the Midwest; and advanced in the South and Northeast.
Forecasts for monthly pending home sales in a Bloomberg survey of economists ranged from a decline of 1% to an increase of 2.1%. The median called for a 0.5% month-over-month gain.