Pending home sales, which is a gauge of signed contracts to buy existing homes, dropped by 1% from June to July, according to the National Association of Realtors. As a result, pending home sales are now down 19.9% from a year ago.
It means that pending home sales have fallen for eight of the last nine months, a result of housing becoming more unaffordable due to rising mortgage rates and higher inflation. The typical monthly mortgage payment has increased 54% from a year ago as a result of higher rates, the NAR said.
However, the drop in pending home sales was noticeably smaller than in earlier months, and could be a sign of the market settling down, at least temporarily, said NAR Chief Economist Lawrence Yun.
“We may be at or close to the bottom in contract signings,” Yun stated. “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.”
Mortgage rates have risen steadily since the start of the year. They peaked in June at just over 6% before falling slightly in July. However, this week they started rising again and are now approaching 6% once more, according to Mortgage News Daily.
Looking at the regions, the NAR said pending home sales fell 1.9% in the Northeast, and are down 15.4% compared to a year earlier. In the Midwest, sales fell 2.7% and are down 13.4% from a year ago.
Pending home sales in the South fell 1.1% and are down 20% from a year ago. The only gain was in the West, which saw pending home sales increase 2.2% sequentially. However, they’re still down 30.1% from a year ago.