WASHINGTON (AP) – More Americans signed contracts to purchase homes in July, a sign that demand for home ownership remains strong despite a shortage of listings on the market.
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The National Association of Realtors said on Wednesday its Pending Home Sales Index, based on contracts signed last month, increased 1.3 percent to 111.3, the second highest reading in over a decade.
Pending home sales on a year-over-year basis rose by 1.4% in July. The Northeast ticked higher by 0.8%, the South also crept higher by 0.8%, while the lone declining region, the Midwest, fell by 2.9%.
Economists had forecast that pending sales, which measure contract activity and are an indicator of future existing home sales, rose 0.7% month-on-month, according to Bloomberg. A sale is typically completed within 60 days of a contract is signed. NAR’s 2015 Profile of Home Buyers and Sellers, representing transactions purchased between July 2014 and June of 2015, found that first-time buyers were 32 percent, the lowest since 1987 (30 percent).
Demand for housing is being driven by the labour market, which is steadily generating steady increases in wages as it nears full employment. Without sufficient equity in their current homes, many of these owners would be unable to generate a down payment for another home with the proceeds from a sale. Economists had forecast pending home sales rising 0.6 per cent last month. He called the trend an early indication that homebuilders are beginning to shift away from larger, more expensive homes at the upper end of the market and toward properties more geared for buyers in the middle and lower price tiers. “If homebuilding increases in the region to tame price growth and alleviate the ongoing affordability concerns”, Yun said, “the healthy rate of job gains should support more sales”.
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The housing market has been a relative bright spot in the economy in recent years, though it has shown signs of cooling amid high prices and tight inventories.
