Pending home sales were up in most areas of the country in July, reaching the second highest reading in more than a decade, according to the National Association of REALTORS®’ Pending Home Sales Index. Last month the Midwest was the only region of the U.S. to see a drop in pending sales.
The index increased 1.3 percent in July to a reading of 111.3. Pending home sales are now 1.4 percent higher than a year ago.
“Amidst tight inventory conditions that have lingered the entire summer, contract activity last month was able to pick up at least modestly in a majority of areas,” says Lawrence Yun, NAR’s chief economist. “More home shoppers having success is good news for the housing market heading into the fall, but buyers still have few choices and little time before deciding to make an offer on a home available for sale. There’s little doubt there’d be more sales activity right now if there were more affordable listings on the market.”
Notably, the West saw the highest jump in pending home sales, with contract signings up to the highest rate in more than three years. Yun attributed the rise to stronger labor market conditions in the region.
“If home building increases in the region to tame price growth and alleviate the ongoing affordability concerns, the healthy rate of job gains should support more sales,” Yun says.
Builders may be showing signs of focusing more on the middle and lower price tiers. They’ve been mostly focused on building larger, pricier homes for the upper end of the market for the last few years.
“REALTORS® in several high-cost areas have been saying for quite a while there is robust demand for single-family starter homes and townhomes at an affordable price point for young buyers,” Yun says. “The home ownership rate won’t move up from its over 50-year low without a meaningful boost from first-time buyers, whose participating has yet to noticeably increase so far this year despite mortgage rates near all-time lows.”
NAR predicts that existing-home sales will reach about 5.38 million this year, a 2.8 percent increase over 2015. That also would mark the highest annual pace since 2006 (when sales were at 6.48 million). Price growth of existing homes will likely moderate to around 4 percent this year, after a 6.8 percent jump a year ago, NAR forecasts.