Pending home sales were mostly unchanged in July, but rose modestly for the sixth time in seven months, according to the National Association of Realtors.
But annually the July rate was up 7 percent over July 2014. Consensus expectation was for a 1 percent gain over the seasonally adjusted sales rate for June, following an upwardly revised decline of 1.7 percent last month.
Selma Hepp, chief economist at Trulia, says that looking at this month’s report, pending home sales have picked up their pace slightly, solidifying expectations of a solid summer home-buying season.
In August, it posted a monthly gain of 0.5%, and 7.4% annual increase. Despite last month’s slowdown, the index has been increasing almost the entire year.
“Despite the ebbs and flows, the housing market is on solid footing that’s being bolstered by strong, broad-based job growth and more millennials creating their own households,” Hepp says. “As we saw earlier this week, the slowing of home sales price appreciation means that the frenzied and competitive markets that we’ve seen in recent years are finally calming down.”
Hepp says that this is a good thing for the market going forward and further evidence that we are far from bubble territory.
Nationally, home prices are still about 20% below the previous peak, with exceptions in areas with strong job growth and a severe lack of inventory. All this said, the main impediments to home sales continues to be tight inventory and affordability.
“As more first-time home buyer enter the market, we will continue seeing improvements in home sales in the coming years. According to a recent Trulia survey, 7 in 10 millennials plan on purchasing a home in 2018 or later,” Hepp says. “Their ability to buy a home is highly contingent on housing affordability and understanding of their mortgage options. Fannie Mae’s announced this week to expand access to credit is welcomed news for all home buyers, especially those potential buyers with limited down payments.”
realtor.com Chief Economist Jonathan Smoke says he thinks the pending home sales plateau is more a seasonal issue.
“This is a tricky time of year to assess housing trends as the market is very seasonal, and the seasonal trend varies across the country,” Smoke says. “While momentum remains strong, we are entering a slower time of year for demand. However, the recent stock market correction has produced a gift to the housing market in the form of lower mortgage rates and a window of time before rates move up again.
“Equally important, credit availability is a bit wider than last year. All of these factors provide a much better venue for first-time buyers to gain more traction in coming months,” Smoke says.
He also notes that in the big picture, the level of sales remains high.
“You’d have to go back to 2006 to see better readings, with the exception of April 2010 on the seasonally adjusted rate when the new homebuyer tax credit ended for new contracts,” Smoke says.