After plummeting to an all-time low in May, pending home sales bounced back a bit in June, with the Pending Home Sales Index rising 4.8%, according to data released Wednesday by the National Association of Realtors (NAR).
The index rose from a reading of 70.8 in May to 74.3 in June, although the latter reading was down 2.6% on an annual basis. A reading of 100 is equal to the level of contract activity in 2001.
According to industry analysts, May’s index value was the lowest reading recorded since NAR began collecting the data in 2001. NAR chief economist Lawrence Yun attributed some of the uptick to an increase in housing inventory.
“Multiple offers are less intense, and buyers are in a more favorable position,” Yun said in a statement. “Even more inventory is expected to come onto the housing market in the upcoming months ahead of the normal, seasonal declines in the winter.”
While the rise in inventory is certainly helping, industry experts believe that an increase in affordability would go a long way toward helping the market.
“Affordability is the main constraint on the housing market. The S&P CoreLogic Case-Shiller Index showed home prices hit a new record high in May. With both mortgage rates and home prices high, the median monthly payment for a homebuyer taking out a 30-year fixed rate mortgage is now over $3,000 and is up more than 20% from just two years ago,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement.
“The number of pending sales in June would have been even higher but some homebuyers are holding back anticipating lower mortgage rates later this year. Buyers likely will also have more options to choose from later this fall. The market will move toward more of a balanced housing market in the second half of the year, but prospective homebuyers will still face competition.”
Pending home sales fell year over year in three of the four major regions, with the Midwest posting the largest yearly decline at 4.2% to an index reading of 73.7. The West posted the only regional gain, up 1% to a reading of 58.4.
Month over month, however, pending sales rose in all four regions. The South posted the largest gain at 6.3% for an index reading of 89.3, followed by the Midwest (up 4.7%), the West (up 3.4%) and the Northeast (up 3%).
“The Northeast’s small gain in contract signings is due to the ongoing housing shortage situation in that region, leading to stronger home price gains. It is a good time to list,” Yun said.
