Pending home sales take a dip
According to the National Association of Realtors (NAR), pending home sales (contracts signed) fell 0.4 percent in June compared to May, but is 10.9 percent higher than June 2012, bringing mixed news after last month’s report that the index had reached its highest level in nearly seven years. NAR reports that pending sales have been above year-ago levels for the past 26 months, and the pace in May was the highest since December 2006.
Dr. Lawrence Yun, NAR Chief Economist, said higher home prices and interest rates are beginning to impact affordability, notably in high-cost regions. “Mortgage interest rates began to rise in May, taking some of the momentum out of contract activity in June,” he said. “The persistent lack of inventory also is contributing to lower contract signings.”
Not all contracts make the cut
Additionally, Dr. Yun notes that not all contracts go to closing. “There are some homebuyers who sign contracts with strong lender commitment letters, but have floating mortgage interest rates. Those rates can be locked as late as 10 to 14 days before closing, so some homebuyers may change their minds if the rate rises too much, which apparently happened with some sales scheduled to close in June,” he said.
Dr. Yun added, “Closed sales may edge down a bit in the months ahead, but they’ll stay above year-ago levels.”
Regional performance varied
Pending home sales in the Northeast were unchanged for the month, but are 12.2 percent higher than a year ago.
The Midwest saw a 1.0 percent slide downward, but are fully 19.5 percent above June 2012.
Pending home sales in the South fell 2.1 percent to an index of 118.3 in June but are 9.5 percent higher than a year ago.
The index in the West rose 3.3 percent in June, and is 4.4 percent above June 2012.
Based on year-to-date sales activity, and stable contract signings expected for the balance of the year, NAR says they project existing-home sales will rise more than 8.0 percent in 2013. Inventory shortages will lead the median price to rise by nearly 11 percent this year.