Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

Pending Home Sales Decrease From Previous High

Written by Paul Esajian

Despite having recently reached a six-year plateau, pending home sales across the United States trended downward in the month of June. According to the National Association of Realtors (NAR), rising interest rates may be attributed to the recent 0.4 percent decrease for the first half of 2013. The reduction dropped the amount of pending contracts to 110.9 in the month of June. However, data released by the NAR identifies a consistent year-over-year increase, suggesting the slip is nothing to be concerned with. Pending home sales have remained above year-ago levels for the past 26 months.

With the continued progression of our economic standing, the housing sector has demonstrated an increased propensity for recovery. As such, mortgage rates and home prices continue to increase on a monthly basis. According to Lawrence Yun, NAR’s chief economist, “mortgage interest rates began to rise in May, taking some of the momentum out of contract activity in June. The persistent lack of inventory also is contributing to lower contract signings.”

According to Yun, not all contracts are subject to closure, as there are many reasons for terminating a potential deal. “There are some homebuyers who sign contracts with strong lender commitment letters, but have floating mortgage interest rates. Those rates can be locked as late as 10 to 14 days before closing, so some homebuyers may change their minds if the rate rises too much, which apparently happened with some sales scheduled to close in June,” he said. “Closed sales may edge down a bit in the months ahead, but they’ll stay above year-ago levels.”

Despite the majority of the United States experiencing a downward trend in pending home sales, the Northeast has yet to experience any fluctuation. As of June, pending home sales in the Northeast remain at 87.2. The stagnation of the Northeast, however, remains 12.2 percent higher than this time last year. By comparison:

  • The Midwest index slipped 1.0 percent to 114.3 in June, but is 19.5 percent above June 2012.
  • The South index slipped 2.1 percent to 118.3 in June, but is 9.5 percent above June 2012.
  • The West index rose 3.3 percent to 114.2 in June, but is 4.4 percent above June 2012.

Despite the recent slip, NAR officials fully expect pending home sales to continue their upward trend. Year-to-date sales activity and expected contract signings suggest an eight percent increase in existing-home sales. This, in association with inventory shortages, may result in housing prices jumping 11 percent by the end of this year.