The National Association of Realtors (NAR) Monday morning released its data on pending sales of existing homes for July. The pending home sales index fell by 0.7% from a June reading of 107 to a July reading of 106.2. The July index is down 2.3% compared with July 2017 and has now lagged year-ago levels for seven consecutive months.
The July pending-sales index decreased in all four NAR geographical regions.
The consensus estimate called for pending sales to be flat month over month. The index reflects signed contracts, not sales closings. An index reading of 100 equals the average level of contract signings during 2001.
The index has been above 100 (the “average” reading) for 45 straight months.
The NAR’s chief economist, Lawrence Yun, noted:
Contract signings inched backward once again last month, as declines in the South and West weighed down on overall activity. 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.
By region, July pending home sales rose to an index score of 94.6 in the Northeast, up a point compared with June and down 2.3% year over year. In the West, sales decreased by 0.9 points to an index score of 94.7, down 5.8% compared to last year’s index.
Sales rose 0.3 points in the Midwest to an index score of 102.2 and remain down 1.5% year over year for the month. Sales in the South decreased by 1.7 points to 122.1 in July and are down 0.9% compared with the year-ago index score.
Existing home sales closed 2017 at around 5.51 million. The NAR’s Yun expects 2018 sales of around 5.46 million (up about 1% year over year), unchanged from last month’s estimate. The national median existing home price is expected to rise by around 5% this year. For 2019, Yun is forecasting existing home sales to rise 2% and home prices to rise by around 3.5%. In 2017 prices rose 5.7% and sales of existing homes increased by 1.1%. In 2016, sales of existing homes increased 3.8%, and prices rose 5.1%.