Pending home sales fell 1.0% in July from June, marking two consecutive declining months, according to the National Association of Realtors (NAR), and the eighth out of the last nine months. The volume of contracts signed declined for the month in all regions but the West, and cumulatively took a 19.9% dive together compared to July of 2021.
This annual decline almost mirror’s last month’s data, leaving analysts digging into the possibility of a housing recession. NAR’s Chief Economist, Dr. Lawrence Yun tells AG that some signs point to recession, but none point to a housing bubble.
Regarding today’s data, Dr. Yun notes that “we may be at or close to the bottom in contract signings. This month’s very modest decline reflects the recent retreat in mortgage rates. Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.”
But still plaguing the industry and potential homebuyers is affordability, which Dr. Yun has been repeating for years. This month, housing affordability sunk to its lowest level since 1989.
In a statement, NAR notes that for a 30-year fixed rate mortgage with a 20% down payment, the monthly payment spiked 54% (or $679) in one year to $1,944.
The Northeast PHSI dipped 1.9% from last month to 79.3, down 15.4% from July 2021. The Midwest index retracted 2.7% to 91.2 in July, a 13.4% decline from a year ago.
In the South, contracts signed 1.1% for the month, and 20% for the year. The Northeast fell 1.9% for the month, and 15.4% for the year, while the Midwest sunk 2.7% monthly and 13.4% annually.
Only the West saw a monthly increase, of 2.2%, but was down a shocking 30.1% for the year, tamping enthusiasm for the monthly performance.
“Home prices are still rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5% by the end of this year and into 2023,” Dr. Yun added. “With mortgage rates expected to stabilize near 6% alongside steady job creation, home sales should start to rise by early next year.”
