US pending home sales drop to lowest since start of the pandemic
US pending home sales fell in July for the sixth time this year to the lowest level since the start of the pandemic, extending the housing market’s sharp downturn as high borrowing costs sideline prospective buyers.
The National Association of Realtors’ (NAR) index of contract signings to purchase previously owned homes decreased 1 per cent from a month earlier to 89.8, according to data released on Wednesday (Aug 24). That followed a nearly 9 per cent decline in June.
The median estimate in a Bloomberg survey of economists called for a 2.6 per cent drop in July.
High home prices and a run-up in mortgage rates this year have pushed home ownership out of reach for many would-be buyers. The pullback has been swift and severe, with a range of measures pointing to weaker sales and construction activity.
The monthly bill on a typical home with a 20 per cent down payment rose to US$1,841 in the second quarter, according to a separate NAR report out earlier this month. That’s up 32 per cent, or US$444, from the first quarter and a 50 per cent jump from a year earlier.
“This month’s very modest decline reflects the recent retreat in mortgage rates,” Lawrence Yun, NAR’s chief economist, said in a statement. “Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.”
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While borrowing costs eased in July, the average contract rate on a 30-year fixed mortgage has crept back up in August, according to recent data from the Mortgage Bankers Association.
Contract signings decreased in 3 of 4 regions, led by a 2.7 per cent drop in the Midwest. Pending home sales rose in the West.
Compared with a year earlier, contract signings were down 22.5 per cent on an unadjusted basis.
Pending home sales are often looked to as a leading indicator of existing-home purchases given properties typically go under contract a month or 2 before they’re sold. BLOOMBERG
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