Pending home sales increased 0.9% in July, marking the second month of consecutive growth, according to data released by the National Association of REALTORS®.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose to 77.6, although it posted a year-over-year decline of 14%. An index of 100 is equal to the level of contract activity in 2001.
Regional Disparities
Sales performance varied regionally. While the Northeast and Midwest saw monthly losses, there were gains in the South and West.
The Northeast PHSI fell 5.8% from June to 63.2, showing a sharp decline of 20.2% compared to July 2022. The Midwest experienced a more modest dip, dropping 0.4% to a July index of 77.5, down 16.0% year over year.
Contrastingly, the South PHSI increased 2.% to 95.3, despite a 10.9% decrease from last year. The West saw the most significant monthly increase, rising 6.2% to an index of 61.3, although it was still 12.8% lower compared to the same month last year.
NAR Chief Economist Lawrence Yun attributes the slight growth in contract signings to the potential for further increases, as jobs continue to be added, enlarging the pool of prospective buyers. "However, rising mortgage rates and limited inventory have temporarily hindered the possibility of buying for many," Yun said.
Yun pointed out that the West region had experienced a meaningful price decline over the past year. "Buyers are quickly returning as a result," he noted.
Although all four regions experienced YOY declines in transactions, this minor growth in the latest report indicates that there may be room for cautious optimism in certain parts of the U.S. housing market.
But overall there remains a sense of caution.
“Compared with August, July was a good month because mortgage rates were lower than they are now," First American Chief Economist Mark Fleming said. "Likely not out of the woods yet. August data will likely be impacted. High mortgage rates are a double-edged sword – homeowners are further disincentivized to sell, buyers lose affordability.”
He added that home sales are likely to remain close to the annualized rate of 4 million into the fall. And the last time the housing market fell below the annualized rate of 4 million home sales was in the depths of the Great Financial Crisis, between July and October 2010.
