According to the National Association of Realtors (NAR), the Pending Home Sales Index (PHSI), a forward-looking indicator that measures contract signings on homes, fell 1.1 percent in June after three consecutive months of solid gains.
The trade group points out that despite the increase, contract activity is considered above average for the month, and has reached that level for the second month in a row after failing to hit the mark since November 2013.
Dr. Lawrence Yun, NAR chief economist notes that despite stabilization in the market, challenges are ongoing and impeding full sales potential.
“Activity is notably higher than earlier this year as prices have moderated and inventory levels have improved,” Dr. Yun said. “However, supply shortages still exist in parts of the country, wages are flat, and tight credit conditions are deterring a higher number of potential buyers from fully taking advantage of lower interest rates.”
Will pending home sales increase or decrease?
Dr. Yun forecasts a slight uptick in sales during the second half of 2014. “The good news is that price appreciation has decreased to its slowest pace since March 2012 behind much needed increases in inventory.”
“With rents rising 4 percent annually,” Dr. Yun added, “potential buyers are less likely to experience sticker shock and can make smart decisions on whether or not it makes sense to buy or continue renting.”
Dr. Yun forecasts that existing home sales will dip 2.8 percent this year to 4.95 million, compared to 5.1 million sales of existing homes in 2013. The national median existing-home price is projected to grow between 5 and 6 percent this year and in 2015.
Regional performance varied
In the Northeast, pending home sales (contracts signed) fell 2.9 percent to 83.8 in June, and is 3.2 percent below a year ago.
In the Midwest the index rose 1.1 percent to 106.6, but remains 5.5 percent below June 2013.
Pending home sales in the South dipped 2.4 percent to an index of 113.8 in June, and is 4.3 percent below a year ago.
The index in the West inched 0.2 percent in June to 95.7, but remains 16.7 percent below June 2013.