June Housing Shows Upswing
Pending home sales increased in all four major regions in June, but overall activity lagged year ago levels for the sixth straight month, according to the National Association of Realtors®.
The Pending Home Sales Index,* www.nar.realtor/pending-home-sales, a forward-looking indicator based on contract signings, rose 0.9 percent to 106.9 in June from 105.9 in May. Despite last month’s increase, contract signings are still down 2.5 percent on an annual basis.
Lawrence Yun, NAR chief economist, says an uptick in existing inventory helped lift contract signings in June. “After two straight months of pending sales declines, home shoppers in a majority of markets had a little more success finding a home to buy last month,” he said. “The positive forces of faster economic growth and steady hiring are being met by the negative forces of higher home prices and mortgage rates. Even with slightly more homeowners putting their home on the market, inventory is still subpar and not meeting demand. As a result, affordability constraints are pricing out some would-be buyers and keeping overall sales activity below last year’s pace.”
According to Yun, the good news is that it is possible the worst of the supply crunch affecting most of the country has passed. Last month, existing inventory was up on an annual basis – albeit slightly – for the first time in three years1. Furthermore, pointing to realtor.com® data on year-over-year changes in inventory in June, several large metro areas saw big jumps in active listings, including Portland, Oregon (24 percent), Providence, Rhode Island (20 percent), Seattle (19 percent), Nashville, Tennessee (17 percent) and San Jose, California (15 percent).
“Home price growth remains swift and listings are still going under contract at a robust pace in most of the country, which indicates that even with rising inventory in many markets, demand still significantly outpaces what’s available for sale,” added Yun. “However, if this trend of increasing supply continues in the months ahead, prospective buyers will hopefully begin to see more choices and softer price growth.”
Heading into the second half of the year, Yun now forecasts for existing-home sales in 2018 to decrease 1.0 percent to 5.46 million – down from 5.51 million in 2017. The national median existing-home price is expected to increase around 5.0 percent. In 2017, existing sales increased 1.1 percent and prices rose 5.7 percent.
The PHSI in the Northeast increased 1.4 percent to 93.7 in June, but is still 4.1 percent below a year ago. In the Midwest the index rose 0.5 percent to 101.9 in June, but is still 2.1 percent lower than June 2017.
Pending home sales in the South climbed 1.1 percent to an index of 124.2 in June, but are 0.3 percent below a year ago. The index in the West inched forward 0.7 percent in June to 95.4, but is 5.6 percent below a year ago.
The National Association of Realtors® is America’s largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.
1Total housing inventory at the end of June climbed 4.3 percent to 1.95 million existing homes available for sale, up 0.5 percent from a year ago (1.94 million) and the first year-over-year increase since June 2015.
*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
