Pending home sales declined marginally in June after recording a notable gain in May, the National Association of Realtors (NAR) reported. Contract activity was split in the four major U.S. regions from both a year-over-year and month-over-month perspective. The Northeast recorded the only yearly gains in June.
The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, fell 1.9 percent to 112.8 in June. Year-over-year, signings also slipped 1.9 percent. 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,” said 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.
“The moderate slowdown in sales is largely due to the huge spike in home prices,” Yun continued. “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 percent to 98.5 in June, an 8.7 percent rise from a year ago. In the Midwest, the index grew 0.6 percent to 108.3 last month, down 2.4 percent from June 2020.
Pending home sales transactions in the South fell 3.0 percent to an index of 132.4 in June, down 4.7 percent from June 2020. The index in the West decreased 3.8 percent in June to 98.1, down 2.6 percent 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.”
“In just the last year, increasing home prices have translated into a substantial wealth gain of $45,000 for a typical homeowner,” he said. “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 percent by the end of the year, and will average 3.6 percent 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). Yun added that, with demand easing and housing starts improving to 1.65 million (1.565 in 2021), existing-home sales prices are expected to increase at a slower pace of 4.4 percent in 2022 (14.1 percent in 2021) to a median of $353,500.