The number of homes that went under contract “has seesawed since Jan.,” says NAR Chief Economist Lawrence Yun, but higher home prices have taken a toll. In areas where housing is more affordable, local pending sales rose because buyer demand remains strong.
WASHINGTON – Pending home sales declined marginally in June after recording a notable gain in May, the National Association of Realtors® (NAR) says. It was even across the country, however, notably in the four broad regions tracked in NAR’s report. It was split both year-over-year and month-over-month. Only one region – the Northeast – recorded year-to-year gains in June.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – fell 1.9% to 112.8 in June. Year-over-year, signings also slipped 1.9%. An index of 100 is equal to the level of contract activity in 2001.
“Pending sales have seesawed since January, indicating a turning point for the market,” says Lawrence Yun, NAR’s chief economist. “Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat.”
Yun says the “moderate slowdown” is largely caused by the “huge spike in home prices.” The Midwest region “offers the most affordable costs for a home and hence that region has seen better sales activity compared to other areas in recent months.”
June pending home sales regional breakdown: The Northeast PHSI increased 0.5% to 98.5, an 8.7% year-to-year rise. In the Midwest, the index grew 0.6% to 108.3 last month, down 2.4% from June 2020.
Pending home sales in the South fell 3.0% to an index of 132.4 in June, down 4.7% from June 2020. The index in the West decreased 3.8% to 98.1, down 2.6% from a year prior.
Yun forecasts that mortgage rates will start to inch up toward the end of the year. “This rise will soften demand and cool price appreciation.”
Yun also notes the gains made by home sellers over the past year.
“In just the last year, increasing home prices have translated into a substantial wealth gain of $45,000 for a typical homeowner,” he says. “These gains are expected to moderate to around $10,000 to $20,000 over the next year.”
According to Yun, the 30-year fixed mortgage rate is likely to increase to 3.3% by the end of the year, and will average 3.6% in 2022. With the slight uptick in mortgage rates, he expects existing-home sales to marginally decline to 5.99 million (6 million in 2021).
With demand easing and housing starts improving to 1.65 million (1.565 in 2021), Yun says existing-home sales prices are expected to increase at a slower pace of 4.4% in 2022 (14.1% in 2021) to a median of $353,500.
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