According to a press release from the National Association of Realtors, pending home sales were largely unchanged in June but did rise slightly higher. Supply and affordability constraints prevented a bigger rise in activity from mortgage rates that are still at near all-time lows.
Increases in the Northeast and Midwest were offset by declines in the South and West. The Pending Home Sales Index which is an indicator based on contract signings, increased 0.2% reaching 111 in June compared to 110.8 in May. The index is now 1% higher than in June 2015. Due to the minor improvement registered last month, the index is now at its second-highest reading over the past 12 months but is noticeably lower compared to peak levels reached in April of 115.
Lawrence Yun, chief economist for the NAR pointed out that a solid increase in activity in the Northeast pulled up pending sales for June saying “With only the Northeast region having an adequate supply of homes for sale, the re-occurring dilemma of strained supply causing a run-up in home prices continues to play out in several markets, leading to the last two months reflecting a slight, early summer cool down after a very active spring. Unfortunately for prospective buyers trying to take advantage of exceptionally low mortgage rates, housing inventory at the end of last month was down almost 6% from a year ago, and home prices are showing little evidence of slowing to a healthier pace that more closely mirrors wage and income growth.”
Unless inventory conditions improve then many prospective buyers are likely to be priced out of the market or outbid on the few available properties for sale. Yun did point out that sales to investors have decreased from a high of 18% in February to a low of 11% in June. This is the smallest share of the housing market since July 2009 which is being attributed to viewer numbers of distressed properties coming onto the market and the rise in house prices which have now increased year-on-year for 52 consecutive months. The hope is that a reduced number of individual investors will help increase the prospects of buying a home for first-time buyers.
Even though contract signings have slowed since April’s peak, existing home sales for this year are still expected to reach about 5.44 million, a 3.6% increase from last year and the highest annual pace since 2006.