Pending home sales have now fallen on an annual basis for seven consecutive months in July, according to the latest report from the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased to 0.7 % in July to 106.2, down from 107 in June. With June’s decline, the index is down 2.3%.
NAR Chief Economist Lawrence Yun said that the housing market’s slowdown throughout the summer has carried over into July.
“Contract signings inched backward once again last month, as declines in the South and West weighed down on overall activity,” Yun stated. “It’s evident in recent months that many of the most overheated real estate markets – especially those out West – are starting to see a slight decline in home sales and slower price growth.”
“The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it, Yun added.”
Yun also said increasing inventory in several large metros, especially in the West, will “cool” price growth, making homes more affordable going forward.
Cities experiencing an increase in listings in July included, Denver, Santa Rosa, California, San Jose-Sunnyvale-Santa Clara, California, Seattle, Nashville, Tennessee, and Portland, Oregon, according to the report.
“Rising inventory levels – especially if new home construction finally starts picking up – should help slow price appreciation to around two-and-four percent, which will help aspiring first-time buyers, and be good for the long-term health of the nation’s housing market,” Yun concluded.
Yun states it is important to recognize the amount of recovery the industry has experienced since the financial crisis, which he attributes to several years of job growth and safe lending and regulatory policy reforms.
According to Yun these factors have contributed to near historic foreclosure lows, and have increased home values and helped millions of households build substantial wealth.
Yun forecasts existing home sales will decrease 1% to 5.46 million in 2018, and the national median existing home price, he predicts, will increase about 5% in 2018.
The PHSI in the Northeast increased 1% to 94.6 in July but is 2.3% lower than 2017. The Midwest index increased by 0.3% at 102.2 but is still 1.5% lower than this time last year.
Lastly, pending home sales in the South fell 1.7% to a 122.1 but is still 0.9% below 2017. The index in the West modestly increased 0.9% to 94.7 and is 5.8% below 2017.