Signings fell in all four regions, reversing annual increases in the spring and suggesting softer closings ahead.
Pending home sales fell 5.4% in June compared to May and down 0.3% from a year ago, the National Association of Realtors reported Thursday, as rising mortgage rates and record national home price increases cooled a market that had seen some strength this spring.
The number of contract signings decreased from the previous month in all four major regions of the United States. On an annual basis, the Northeast (up 2.2%) and Midwest (up 0.3%) recorded modest increases, while the South (down 0.9%) and West (down 1.1%) saw declines, according to the report.
Lawrence Yun | Chief Economist, National Association of Realtors
“The highest mortgage rates in nearly a year and the highest national median home price on record are contributing to a weak housing market, especially challenging for first-time homebuyers,” NAR Chief Economist Lawrence Yun said in a statement, adding that continued job growth could support housing demand.
Because NAR’s index tracks closings, not closings, June’s decline could foreshadow a future decline in existing home sales activity over the next month or two.
Just last week, NAR reported that June sales fell by a seasonally adjusted annual rate of 2.4% to $4.09 million. This year is the fourth consecutive year in which the number of home sales remains at around 4 million units.
At the same time, the median home price rose 1.8% year over year to a new record of $440,600, NAR’s report found. This was the 36th consecutive month of annual price increases.
Sam Williamson | Senior Economist, First American
“After a sudden rebound in homebuyers this spring, homebuyers took a step back in June,” Sam Williamson, senior economist at First American, said in a statement. “With mortgage rates rising to their highest levels in almost a year and home prices remaining high, the math is becoming more difficult, especially for first-time buyers.”
Regional breakdown
Northeast: -3% m/m. +2.2% YoY Midwest: -8.9% MoM. +0.3% YoY South: -4.1% MoM. -0.9% YoY West: -4.7% MoM. -1.1% YoY
Mr Williamson said the breadth of the decline was noteworthy: “With contract numbers falling in all four major regions, the widespread decline suggests that the recent rise in mortgage rates is finally catching up with buyers’ wallets.”
Interest rate pressures have not abated since the end of June. The average 30-year fixed rate rose to 6.65% in the week ending July 10, tying a nine-month high, but purchase offers fell 7.3% for the week, according to the Mortgage Bankers Association.
“Other leading indicators are pointing in the same direction,” Williamson said. “Mortgage purchase applications, another forward-looking indicator, have softened in recent weeks after rising for much of the spring. The decline in applications, coupled with a decline in contract signings, suggests buyers and sellers are settling on the sidelines.”
Yun issued his own caution against reading too much into monthly contract data, noting that “it is closing activity, not contract signing, that generates the economic impact,” noting that pending contracts do not perfectly match closed deals due to fallout rates and contract contingencies.
The Midwest, the most affordable of the four regions, recorded a large monthly decline, although it maintained a small increase for the year.
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