A pending home sale is one in which a contract was signed but not yet closed.
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According to the National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI), pending home sales dropped in June after five consecutive months of increases, but remained close to May’s level, which was the highest in nine years.
The PHSI in the Northeast inched 0.4 percent to 94.3 in June, and is now 12.0 percent above a year ago. An easing of those conditions, along with an acceleration in wage growth, would allow more Americans to take advantage of cheap borrowing costs and provide more of a tailwind for real estate. “The consumer still remains under a lot of pressure”.
As of June, pending sales had increased for ten consecutive months, year-over-year, according to NAR.
The consensus estimate called for a month-over-month increase of 1% in pending sales.
“Competition for existing houses on the market remained stiff last month, as low inventories in many markets reduced choices and pushed prices above some buyers’ comfort level”, the group’s chief economist Lawrence Yun said in a statement.
The index found that pending home sales fell 1.8 percent to 110.3 in June but is still 8.2 percent above the June 2014 level of 101.9.
Pending sales are a barometer of future purchases. A large portion of that is going into the rental market, boosting construction of multi-family homes.
The decline in contracts, which came on the heels of reports showing the pace of home price appreciation stalling in major cities and new home sales dropping, did little to change perceptions that the housing market recovery was on track given a tightening labor market. While steady job growth and low interest rates have been helping to prop up demand, they’ve been countered by tight lending standards for some Americans and a limited selection of available homes.
NAR said existing home sales climbed 3.2 percent to an annual rate of 5.49 million in June from a downwardly revised 5.32 million in May.
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NOTE: Second quarter metropolitan area home prices will be published August 11, Existing-home Sales for July will be reported August 20, and the next Pending Home Sales Index will be August 27; release times are 10:00 a.m. EDT. The Western region’s index rose 0.5% to 104.4, 10.4% above a year ago.
