Pending home sales rise for first time in three months
Contract signings to purchase previously owned homes rose for the first time in three months, indicating the housing market is stabilizing on the heels of a modest pickup in listings, lower taxes and a robust labor market, data from the National Association of Realtors in Washington showed Monday.
The index increased 0.9% month-over-month (the estimate was 0.1%) in June after a 0.5% decrease. The gauge dropped 4% year-over-year on an unadjusted basis after a 2.8% decline.
The month-over-month gain in contract signings was broad-based with all four major U.S. regions showing gains. Meantime, Portland, Ore., Seattle and San Jose, Calif., were among several cities showing big increases in new listings, according to the NAR. While the pickup in inventory is welcome and could help bring down prices, the group says more supply is needed to meet demand.
Low unemployment and tax cuts are padding pocketbooks, and are seen as likely to aid home demand. More sizable gains, however, may prove difficult as homebuyers face headwinds from fewer affordable housing options as mortgage rates remain elevated. What's more, wage gains are barely keeping up with rising inflation.
The figures follow recent reports showing the weakest pace of housing starts in nine months, fewer construction permits and the slowest rate of new-home sales since October.
"The positive forces of faster economic growth and steady hiring are being met by the negative forces of higher home prices and mortgage rates," Lawrence Yun, NAR's chief economist, said in a statement. "Even with slightly more homeowners putting their home on the market, inventory is still subpar and not meeting demand. As a result, affordability constraints are pricing out some would-be buyers and keeping overall sales activity below last year's pace."
Signings rose 1.4% in the Northeast and increased 1.1% in the South. In the West, contract signings advanced 0.7%, while in the Midwest they rose 0.5%. Economists consider pending sales a leading indicator because they track contract signings. Purchases of existing homes are tabulated when a deal closes, typically a month or two later. Yun projects 2018 existing-home sales of 5.46 million, down from 5.51 million in 2017; the previous 2018 forecast was 5.49 million.